Housing Trends

With mortgage interest rates hitting a 30-year low -- falling to 2.86 percent -- many consumers are looking to secure a lower rate for themselves by refinancing. This has led to a 20 percent spike in refinancing applications in January.

According to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS), low interest rates have also leveraged the number of applications to purchase a home, up 10 percent from a year ago. 

Piqued by hope for more stimulus checks

Many consumers are hoping that the change in administrations on Capitol Hill might bring them some additional funds that could help offset the cost of getting a better mortgage deal. 

"The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, drove Treasury yields and rates higher,” claimed Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. 

Kan went on to note that many consumers are ditching the idea of once-loved adjustable-rate mortgages (ARM) due to the possibility of being able to lock in a good rate. The ARM share of activity has pretty much bottomed out, decreasing to 1.6 percent of total applications. 

Make sure you understand interest rates

While a fat stimulus check sounds like a great way to help buy or refinance a home, one analyst says consumers need to understand how the whole interest game plays out before they get too far ahead of themselves. 

“Covid-relief stimulus may do great things for people in the short term and for the economy in the longer term, but it does bad things for interest rates (assuming you like low rates, that is),” commented Mortgage News Daily’s Matthew Graham. “Reason being: the government issues/creates/sells U.S. Treasuries to finance the additional spending. More Treasuries issued = higher yields/rates, all other things being equal, and Treasuries correlate significantly with mortgage rates.”

Graham went on to say that the recent low rates were likely a normal correction to the short-term oversold momentum. “That said, there are logical reasons for rates to continue higher in the longer term. As such, there's no guarantee about how much additional improvement we might see this week,” he said.

Each year, United Van Lines issues a study of where Americans chose new homes and the places they left behind. Because of the coronavirus (COVID-19) pandemic, the 2020 study may take on added relevance.

To be clear, the 44th annual migration report is not a scientific study but is based on company moving records for the year, with a focus on trends. It’s not the only moving company in America but its scale suggests it could confirm other anecdotal evidence emerging in the past year. And it does.

According to the study, Idaho was the state with the highest percentage of inbound migration -- 70 percent. That coincides with reports of young apartment dwellers, suddenly working from home, looking for new homes with wide-open spaces.

New Jersey topped the list of states that people left, a spot it’s held for three years in a row. New York, Illinois, Connecticut, and California were close behind on the list of states people abandoned.

Jobs were a big factor

The United survey each year asks customers why they are moving. This year, 40 percent said they moved for a new job or for a transfer. Left unsaid was whether the job could be done from anywhere.

Twenty-seven percent said the move was to be closer to family. Again, the ability to work remotely could have granted more people that flexibility as the pandemic closed offices across the nation.

For customers who cited COVID-19 as an influence on their move in 2020, the top reasons they gave were concerns for personal and family health and wellbeing, the desire to be closer to family, and new workplace flexibility. 

But even though COVID-19 may have had an outsized influence on people’s migration patterns in 2020, the data shows some trends remained consistent with previous years.

Consistent trends

"United Van Lines' data makes it clear that migration to western and southern states, a prevalent pattern for the past several years, persisted in 2020," said Michael A. Stoll, economist and professor in the Department of Public Policy at UCLA. "However, we're seeing that the COVID-19 pandemic has without a doubt accelerated broader moving trends, including retirement driving top inbound regions as the baby boomer generation continues to reach that next phase of life."

People moving to begin new lives in retirement were less affected by the pandemic. Delaware, with a very low state income rate, was number one. Florida, with no state income tax and plenty of sunny weather, was number two.

Rents actually went down a bit during the pandemic, but a new report from real estate marketplace Zillow suggests that this break for renters is coming to an end.

In 2021, Zillow says it expects the largest increase in rents since 2005 -- at the height of the housing bubble.

Late this year, rents began to rebound, largely based on rising home values. The typical rent was up 1.1 percent year-over-year in November to $1,734. Among the 100 largest markets, monthly rent growth was highest in Stamford, Conn; Providence, R.I.; and Ogden, Utah -- which grew between 2.1 percent and 3.1 percent. 

For the most part, rents in November were roughly where they were at the beginning of 2020 as more people -- members of Generation Z especially -- began looking for new places to live. Zillow expects that trend to gain momentum in 2021.

Lifting cloud

"With a vaccine on the horizon and Gen Z continuing to graduate from college, we expect the cloud of uncertainty surrounding the pandemic to lift and demand for rental units to surge in 2021," said Zillow senior economist Chris Glynn. 

Glynn says the anticipated rebound in rents may be good news for landlords, but it comes at a bad time for millions of renters who were hit hard by pandemic-related income loss, putting them in an even more tenuous position.

“Further government intervention will likely be needed to avoid a painful wave of evictions," Glynn concludes.

Supply and demand are obviously one factor that is pushing up rents, but the Zillow report says rising home values are also a big contributing factor.  Zillow's typical home value rose 1.1 percent from October to November and 3 percent over the past three months -- both of which are the largest gains on record going back to 1996. 

Home values are up 7.5 percent since last year to $263,351, with the largest annual increases by metro in San Jose, Phoenix, and Seattle -- all posting double-digit increases.

Record low inventory

In a perfectly balanced market, the rapid increase in home values would lead to increases in construction, including apartments. But new construction has been slow to add to housing inventory, which continued to drop to record lows this year.

"We expect the housing market to continue its bull run from this summer and fall well into 2021," said Zillow senior economist Jeff Tucker. "This rapid price growth will be driven by the same factors that took the steering wheel in 2020: strong demographic trends, shifts in buyer preferences sparked by the pandemic, low mortgage rates, and short supply.”

Millennials, now in their mid-30s, can be expected to continue moving out of apartments and purchasing homes. But Tucker says that might bring little relief to the rental market as it continues to drive up property values in 2021.

As home prices rose during the pandemic, homeowners in the United States have collectively gained around $1 trillion in equity, according to a report from CoreLogic. 

Homeowners with mortgages in the U.S. have seen an equity increase of 10.8 percent, or about $17,000 per homeowner. CoreLogic said that’s the largest equity bump seen since the first quarter of 2014.

Since the onset of the pandemic, home prices have been trending upward. Many people decided to move for various reasons related to the work- and school-from-home conditions necessitated by the health crisis. Others opted to move to less densely populated regions in the interest of safety, and some decided to buy homes this year due to record-low mortgage rates. But while housing demand grew stronger, supply remained lean. 

CoreLogic said homeowners will probably see their equity grow even more in the months ahead before the numbers moderate at some point over the next year.

“Equity gains are likely to persist over the next several months as strong home-purchase demand is expected to remain high and continue pushing prices up,” the report said. “However, the CoreLogic HPI Forecast shows home prices slowing over the next 12 months as new home construction and more existing for-sale homes ease supply pressures. This could moderate the pace of both home price growth and equity gains.” 

Varied by market

The amount of equity gained per homeowner varied by location, with homeowners in locations with the hottest home prices seeing the biggest gains. 

Washington had the highest year-over-year average increase at $35,800. Homeowners in California gained $33,800, and those in Massachusetts gained an average of $31,200. The smallest equity gain was seen in North Dakota, where homeowners gained just $5,400 in equity. 

Frank Nothaft, chief economist at CoreLogic, said the equity gains of 2020 can provide “an important buffer to protect families if they experience financial difficulties.” Borrowers who aren’t able to keep their homes due to financial hardships may still be able to sell into the market and make a profit.

The coronavirus (COVID-19) pandemic has spurred mobility in 2020 when it comes to housing. People have been on the move, often relocating to other cities since they now work virtually.

Realtor.com has issued a new report, highlighting what it says will be real estate hotspots in 2021, drawing homebuyers from all over the country. Not surprisingly, cities that are technology centers lead the pack.

Here’s the list of realtor.com’s top 10 hot spots::

1. Sacramento

2. San Jose

3. Charlotte

4. Boise, Idaho

5. Seattle

6. Phoenix

7. Harrisburg, Pa.

8. Oxnard, Calif.

9. Denver

10. Riverside, Calif.

Reliant on technology

"This past year, we've all become more reliant on technology to work, learn, and maintain personal connections,” said Danielle Hale, realtor.com’s chief economist. "Additionally, the relative stability of government jobs in the past year has driven home prices and sales in several state capitals to the top.” 

The list is also dominated by small to mid-sized cities. New York, Chicago, and Los Angeles aren’t where people are headed. Instead, cities like Sacramento, San Jose, Charlotte, Harrisburg, Pa., and Boise, Idaho are expected to emerge next year as housing hot spots.

Even during the pandemic, these cities have been blessed with a stable job market and plenty of jobs paying high salaries. And for that reason, Hale says people considering a move to one of these hotspots should be prepared to act fast.

Expect rising prices

“Home buyers, particularly younger first-time buyers, looking in one of these markets should expect rising prices and heavy competition,” she said. “Meanwhile, sellers will remain in a position of power, but will find themselves on the other side of the bargaining table when buying their next home."

In addition to technology industry centers, the hot spots include many state capitals. In fact, five of the top 10 cities are centers of government. They’ve all attracted more than their share of millennials in 2020.

Data from realtor.com shows millennials make up 14.1 percent of the population of the top 10 cities, slightly higher than the U.S. as a whole. 

The report concludes that a city’s ability to lure millennials is a good indicator of the livability of the area including job opportunities, dining, and entertainment. 

Demand for single-family homes is rising, along with prices, while inventory levels continue to fall. A new report from Zillow suggests that trend will continue “for years to come.”

For buyers, it means it may be harder to find an affordable home. For sellers, it means getting more money for your home as supply keeps falling behind demand.

It’s true that the current coronavirus (COVID-19) pandemic has contributed to the imbalance, but the researchers at Zillow say a significant cause goes back more than a decade, to the housing crash associated with the 2008 financial crisis.

They point to low rates of household formation since the Great Recession -- what they call “missing households.” People graduating from college after 2009 were slow to move out of their parents’ home because it was hard to find a job.

As the economy recovered and they have been better able to afford apartments and houses, there has been a long and sustained increase in demand for housing. At the same time, builders are constructing houses at about half the rate they did before the financial crisis.

High demand for the foreseeable future

According to Zillow, the missing households from the past 15 years and the large millennial generation aging into peak homebuying age should keep housing demand high for the foreseeable future. 

“The last two years showed that when the economy is firing on all cylinders and most Americans have access to decent jobs, more of them will be able to find a home of their own,” said Zillow senior economist Jeff Tucker. “The sooner we can put the pandemic and 2020 recession behind us, the sooner access to housing can resume its expansion."

But the pandemic has affected housing in unforeseen ways. It has spurred a wave of home buying as many apartment dwellers in America’s cities sought for more space in the suburbs. Working remotely allowed millions of people to think about moving much farther away from the office because it was no longer necessary to make the commute.

The Zillow report highlights a fundamental problem for the housing market going forward -- the basic economic principle of supply and demand. There are simply more people trying to buy a home right now than there are available homes.

"Solid fundamentals remain for the housing market, including low interest rates and high consumer demand. However, financing to invest in lots, land and inventory has been a significant challenge for private builders," said Todd Pyatt, owner of Pyatt Builders.

Shrinking inventory

According to the National Association of Realtors (NAR), total housing inventory at the end of October totaled 1.42 million units, down 2.7 percent from September and down nearly 20 percent from one year ago. 

"Homebuilders' confidence has soared even though the actual production has not," said Lawrence Yun, NAR’s chief economist. "All measures, such as reduction to lumber tariffs and expansion of vocational training, need to be considered to significantly boost supply and construct new housing."

Builders in recent years have focused on building more expensive luxury homes because lower-priced entry-level homes have a much smaller profit margin. Making inventory levels even tighter, current homeowners are not selling as often as in the past.

Zillow concludes this dynamic is probably not going to change anytime soon. Even with record-low mortgage rates, buyers will find it challenging to find and pay for a home.

The housing market is still soaring. Sales of existing homes jumped 4.3 percent last month, according to the latest data from the National Association of Realtors (NAR).

Homes sold in October at an annual rate of 6.85 million units. While sales were up sharply from September, they were even higher when compared to last year, rising 26.6 percent over October 2019.

The numbers show a trend that began soon after the coronavirus (COVID-19) pandemic began and the economy shut down for six weeks in the spring. Since then, people have been moving out of cities and buying homes in the suburbs and smaller cities.

“Considering that we remain in a period of stubbornly high unemployment relative to pre-pandemic levels, the housing sector has performed remarkably well this year," said Lawrence Yun, NAR's chief economist. 

Resilient net worth

The economy is still struggling with the effects of the pandemic. Unemployment remains at more than twice pre-pandemic levels, and new claims for unemployment benefits have begun rising again. Many Americans are facing economic hardships, but homeowners have seen their net worth remain remarkably resilient.

"The surge in sales in recent months has now offset the spring market losses," Yun said. "With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3 percent in 2021, I expect the market's growth to continue into 2021." 

Yun expects the sales trend to continue, recently forecasting that existing-home sales will rise by 10 percent to 6 million in 2021.

Fewer homes to choose from

The demand for housing may spur homebuilders to increase the nation’s supply, but that is happening at a plodding pace so far. That means there are fewer available homes to purchase, and those on the market are carrying higher price tags.

The median existing-home price for all housing types in October -- including condos and co-ops -- was $313,000, up 15.5 percent from October 2019. NAR said prices were up in every region of the country.

The nation’s inventory of homes on the market continued to shrink. At the end of October, total inventory was 1.42 million units, falling 2.7 percent from September.

Taken with the rise in sale prices, that presents a challenge to people trying to purchase a home. According to NAR, unsold inventory sits at an all-time low 2.5-month supply at the current sales pace, down from 2.7 months in September and lower than the 3.9-month figure recorded in October 2019.

The coronavirus (COVID-19) pandemic has led to a home-buying binge that has significantly raised the price of the average single-family home. But it has also reduced what landlords can charge for rent, and Generation Z appears to be taking advantage of it.

New research from Zillow shows that vacancy rates in New York and other large cities rose sharply as families moved to the suburbs during the spring and summer. Young people, many of whom were living with their parents, have begun moving in.

They’re being drawn by concessions like a free month's rent and are either renting a place for the first time or moving up from a smaller apartment. According to Zillow, most of the move-ups say they moved because they got a better deal.

"What we're seeing is that renters who might have been in a small apartment are instead looking at larger units -- maybe a two-bedroom instead of a one-bedroom," said Zillow Premier Agent Kenny Truong, founder of Fast Real Estate in the San Francisco Bay Area. "Some others are moving to a rental with a view or a yard for a similar price." 

Rising vacancy rates creating deals

According to the U.S. Census Bureau, the rental home vacancy rate rose from 5.7 percent in the second quarter to 6.4 percent in the third quarter as apartment dwellers suddenly working from home decided they needed more space. At the same time, the owner-occupant vacancy rate shrank to 0.9 percent.

The Zillow survey found more than a third of Gen Z renters who moved in the past year reported moving from the home of a family member or friend. That's up from 20 percent who reported the same in an April survey. This data is consistent with previous Zillow research that found the number of young adults living with parents or grandparents was beginning to fall in September, after rising dramatically in the spring.

The survey found that Gen Z renters who moved from an existing apartment they were renting to another paid more for their new home, but many said it was a better value that gave them more home for their money.

On a national basis, the typical monthly rent was nearly 1 percent higher in September but lower than last year in seven major metro areas. This suggests that a glut of empty apartments has pulled rents lower in some areas.

The number of mortgage applications to purchase a home fell sharply last week to a six-month low. It’s a signal to people who have been thinking about a home purchase that now may be the time to pull the trigger.

Since the early days of the coronavirus (COVID-19) pandemic, the housing market has been on a tear. Not only has there been increased competition for available homes, but the overheated market has also pushed up home prices.

Now there are fewer buyers competing for homes, as evidenced by the Mortgage Bankers Association report. It showed that mortgage applications last week fell 3 percent from the week before, continuing a downward trend during the fall.

But to give you an idea of how heated 2020’s housing market is compared to last year’s, the report shows demand for mortgages last week was still 16 percent higher than during the same week in 2019.

Plenty of headwinds

There are still plenty of headwinds facing home buyers in the fall of 2020, but at least the competition, which was fierce during the summer, isn’t as intense. There may be fewer bidding wars between competing buyers.

But home prices have risen significantly since this time a year ago, partly because people working from home have decided they need more space and partly because there remains a lack of available homes on the market.

Low rates, higher prices

Housing experts say something else may be encouraging sellers to keep raising their asking prices -- record-low interest rates. If buyers are paying less interest they can afford to pay more for the home, and sellers haven’t been shy about asking for higher prices.

The National Association of Realtors (NAR) reported that the median price for all housing types in September was $311,800, a nearly 15 percent increase from September 2019. It said September's national price increase marked 103 straight months of year-over-year gains.

 “Inadequate housing supply is putting upward pressure on home prices and is impacting affordability — especially for first-time buyers and lower-income buyers,” Joel Kan, an economist at the Mortgage Bankers Association, told CNBC.

The average rate on a 30-year fixed-rate mortgage fell to a low of 2.98 percent last week. That’s a full point lower than buyers could have gotten a year ago.

The coronavirus (COVID-19) pandemic has not only raised home prices; it’s also significantly raised rents, which were pretty high to start with.

As the median purchase price of a single-family home has risen nearly every month during the pandemic, The Wall Street Journal reports that the cost of renting a single-family home has risen just about as fast.

It analyzed data from large corporate landlords, such as Invitation Homes and American Homes 4 Rent, describing their business as “pandemic proof.” These large landlords picked up thousands of homes across the nation during the financial crisis of 2009, when home prices plunged.

Many of these homes are in suburban areas of the country that have seen an influx of former city dwellers seeking more room, inside and out. Housing experts attribute this migration to the fact that so many people have been working from home since late March.

“The demand we see today is totally insatiable, and it’s growing,” David Singelyn, chief executive of American Homes 4 Rent, told The Journal. The company reportedly owns more than 53,000 houses in 22 states. Most recently, its monthly rent has averaged just under $1,700 a month.

Rent costs continue to increase

According to The Journal, which cited data from analytics firm Green Street, listed rents for available homes owned by large corporate landlords rose 7.5 percent in October alone. It was the fifth consecutive month of year-over-year increases and the largest on record.

For a household that hasn’t lost income during the pandemic, rising rents are a financial burden but not a crisis. For families where one or both wage-earners are out of work, rising rents may pose quite a large crisis.

Because of the growing shortage of available homes to buy or rent, housing costs have been rising sharply for the last three years. In January, even before the pandemic hit, the Harvard Joint Center for Housing Studies issued a report showing that rent affordability was beginning to affect even middle-income consumers.

With higher-income households accounting for much of the growth in rental demand since 2010, the report noted that new supply has been concentrated at the upper end of the market. At the same time, demand for rental housing at the low-to-middle income segments of the market took off.

"Rising rents are making it increasingly difficult for households to save for a downpayment and become homeowners,”  said Whitney Airgood-Obrycki, a research associate at the Center and lead author of the report. “Young, college-educated households with high incomes are really driving current rental demand."

That also seems to be the case 11 months later. People with young families have led the wave of new renters, seeking greener pastures in the suburbs amid the COVID-19 pandemic and creating new demand that has put upward pressure on rents.

After an extremely hot sales summer, home sales cooled significantly in September. Pending home sales, which reflect contracts that were signed during the month, dropped 2.2 percent from August to September.

Putting that in context, however, is how September sales compared to 12 months earlier. Year-over-year, sales contract signings were up 20.5 percent from September 2019, showing just how active the market has been since the coronavirus (COVID-19) pandemic began.

"The demand for home buying remains super strong, even with a slight monthly pullback in September, and we're still likely to end the year with more homes sold overall in 2020 than in 2019," said Lawrence Yun, NAR's chief economist. "With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future."

Since May, the pandemic has largely shaped the housing market. Millions of apartment dwellers suddenly working from home began to look for single-family homes. Others sought homes in other cities, convinced they could continue to work remotely. NAR expects that trend to continue.

"Additionally, a second-order demand will steadily arise as homeowners who had not considered moving before the pandemic begin to enter the market," Yun said. "A number of these owners are contemplating moving into larger homes in less densely populated areas in light of new-found work-from-home flexibility."

Seattle, Boston, and Los Angeles lead

Realtor.com's Housing Market Recovery Index, which reveals metro areas where the market has recovered or even exceeded its previous January levels, showed the greatest recoveries as of October 10 were in Seattle-Tacoma-Bellevue, Wash.; Boston-Cambridge-Newton, Mass.-N.H.; Los Angeles-Long Beach-Anaheim, Calif.; Las Vegas-Henderson-Paradise, Nev.; and San Jose-Sunnyvale-Santa Clara, Calif.

A report this week from online real estate marketplace Zillow showed how the pandemic has distorted the housing market. Uncertainty, likely caused by COVID-19, is keeping more than a third of would-be sellers out of the market. Financial anxiety is a big part of that, the Zillow survey found.

The result is fewer homes for sale, which could be one reason for September’s drop in new sales. Thirty-one percent of current homeowners point to financial worries as a reason to stay in their current home, with 27 percent saying they recently suffered a loss in household income. While they might find ready buyers for their home, they worry about qualifying for a mortgage to purchase a new one.

When the coronavirus (COVID-19) pandemic hit the U.S. in March, the nation’s housing market was already facing a shortage of homes for sale. Since then, the imbalance between buyers and sellers has gotten a lot bigger.

Online real estate marketplace Zillow has just published new research that explores the reason for the disparity. It has always been clear that fewer people are putting their homes on the market, but Zillow wanted to know why.

The answers all revolve around the pandemic. Uncertainty, likely caused by COVID-19, is keeping more than a third of would-be sellers out of the market. Financial anxiety is a big part of that, the survey found.

Thirty-one percent point to financial worries as a reason to stay in their current home, with 27 percent saying they recently suffered a loss in household income. While they might find ready buyers for their home, they worry about qualifying for a mortgage to purchase a new one.

Future of work-from-home

Others who are still employed are waiting to see what employers decide about the remote workplace. They like working from home and, if allowed to do it permanently, say they would consider selling their current home and moving to another area.

Because there are fewer homes on the market, and more people are trying to buy a home, home prices have risen quickly since the pandemic began. The median home price in September surged by a record 15 percent, to $320,625, according to a report from real estate broker Redfin. It also found that prices have been rising more quickly since early July.

In August, pending home sales were up 26 percent year-over-year, and homes sold almost as fast as they could be listed. More than 45 percent of homes that went under contract had an accepted offer within the first two weeks on the market. Because of that, some would-be sellers are in no hurry.

No ‘right time’ to sell

"Potential sellers are likely correct that home prices have yet to reach their peak, but in the long run, prices tend to rise, so there's no clear 'right time' to sell," said Zillow senior economist Jeff Tucker. "Homeowners who feel life is uncertain right now may think they can still get a strong price if they delay selling until they have more clarity.”

But there is some risk in that strategy. They may get more for their home when they decide to sell but the cost of their new home is also likely to be higher.

“This fall's record-low mortgage rates, which make a trade-up more affordable on a monthly basis, are not guaranteed to last," Tucker said.

Homeowners saw their net worth rise over the summer as home values increased at a pace not seen since the market recovered from the Great Recession.

Zillow, an online real estate marketplace, reports that the typical home value increased in September to $259,906. The 0.8 percent increase over August was the largest since November 2005, at the peak of the housing bubble.

For the third quarter, the typical home value increased by 2.2 percent, the biggest jump since 2013. On a year-over-year basis, values were up 5.8 percent, the largest increase in two years, according to Zillow researchers.

Because of that rapid rise, Zillow reports that listing prices and sales prices both registered double-digit year-over-year growth last month, suggesting buyers could face both higher prices and fewer choices going into the end of 2020.

"Home values are accelerating more quickly than any time since 2014, marking a sharp turnaround from a market briefly put on hold during the outbreak of the pandemic this spring," said Zillow’s senior economist Jeff Tucker. "The historic shortage of homes available for sale has boosted home price appreciation, now that buyers are waging bidding wars for the few options left.”

New home construction can’t keep up

There are several reasons for the current shortage of homes. Fewer people who currently own homes are selling. There are more people in the market right now who are deciding they need more indoor and outdoor space after being largely homebound during the pandemic.

But one of the biggest contributing factors is the decade-long slowdown in new home construction. Builders have built fewer homes since the financial crisis, a trend that is only beginning to turn around in the face of rising demand.

“Builders are racing to fill the gap, and we may see more listings next year if nervous sellers become reassured, but this shortage of homes is so deep that any reversal would take at least several months," Tucker said.

Potential slowdown

The forecast suggests that home sales reached a recent high point in September and will experience a temporary slowdown in the coming months. Seasonally adjusted final home sales are expected to retreat to pre-pandemic levels by January before resuming growth in the spring. After that, they’re projected to stay firmly above pre-pandemic volume through most of 2021.

A new report from Fannie Mae shows the housing market is one of the few bright spots in the 2020 economy, hit hard by the coronavirus (COVID-19) pandemic. Doug Duncan, Fannie Mae’s chief economist, says housing may help the economy recover to break-even status, with 2021’s economic growth balancing out 2020’s decline.

"Meanwhile, housing continues its multi-year theme of historic supply constraints,” Duncan said. “Strong demand-side drivers, including low mortgage rates and a surge of millennials looking to purchase homes, are contributing to significant home price appreciation, particularly as many older homeowners continue to age in place and other would-be home-sellers adopt a more conservative posture due to COVID-19 concerns, further limiting supply."

The housing market remains red hot as the coronavirus (COVID-19) pandemic has done nothing to slow sales.

Pending home sales, which measure sales contracts that were signed, rose a record 8.8 percent over July’s sales, according to the National Association of Realtors (NAR). Sales were up more than 24 percent from August 2019, accelerating a trend that began in June.

Lawrence Yun, NAR’s chief economist, says several factors are encouraging buyers -- in particular mortgage rates hovering around 3 percent.

"Additionally, the Fed intends to hold short-term fed funds rates near 0 percent for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace,” Yun said.

‘Pleasantly surprised’

Yun also said he expected the housing market to remain stable during the pandemic but has been “pleasantly surprised” to see housing bounce back the way it has.

All four regions of the country saw a strong increase in sales contracts. The West saw the biggest increase in sales from July, with contracts rising 13.1 percent. Sales were up 8.6 percent in both the South and Midwest.

On an annual basis, sales contracts were up 26 percent over August 2019 in the Northeast and were up double digits in the other three regions. Contracts signed in August can be expected to close in September in October, though some deals are likely to fall through.

Yun says these robust sales figures are probably not sustainable without an increase in the number of available homes for sale. He points out that pending home sales are outperforming many pre-pandemic averages, but he says that without matching supply, the recovery can’t last.

Mortgage applications fell last week

We may have seen the first signs of that this week, when the Mortgage Bankers Association (MBA) reported that mortgage applications declined last week by 4.8 percent from the previous week. 

A significant part of the decline was for refinanced mortgages, but MBA said mortgage applications to purchase homes were also lower. Still, compared to the same week in 2019, applications were up more than 20 percent.

Joel Kan, MBA's associate vice president of Economic and Industry Forecasting, isn’t ready to draw conclusions about the housing market, suggesting factors other than demand could be responsible for the fall off.

"Many lenders are still operating at full capacity and working through operational challenges, ultimately limiting the number of applications they are able to accept," he said.

Interest rates, meanwhile, are only getting lower. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 3.05 percent last week from 3.10 the previous week.

Housing markets where buyers get more value for their money than in a major metro have seen some of the fastest price appreciation over the last year, a trend accelerated by the coronavirus (COVID-19) pandemic.

A new report from real estate brokerage firm Redfin suggests that a migration from large cities to smaller ones has increased the price of homes in relatively affordable places like El Dorado County, Calif., and Camden County, N.J. This has attracted a new category of buyer as house hunters take advantage of remote work and record-low interest rates.

The report shows that seven of the 10 markets that have cooled the most in the last year are located in New York, including four of the five New York City boroughs. Not surprisingly, seven of those markets have median sale prices above $500,000.

‘Influx of buyers’

Meanwhile, home prices are rising fastest in California’s El Dorado County, where buyers are moving from other parts of the state because they can work remotely. The region has seen home sales skyrocket by nearly 60 percent over the last year as buyers have flocked from the San Francisco Bay Area.

"We're seeing a huge influx of buyers coming to El Dorado County from the Bay Area," said local Redfin agent Ellie Hitchcock. "With so many large tech companies allowing employees to work from home for the foreseeable future, homeowners in San Francisco are selling their two-bedroom, two-bathroom condo and buying a 5,000-square-foot home with five bedrooms and five bathrooms on an acre of land here for the same price. It's simply a no-brainer."

Activity in smaller housing markets may be driving overall home sales higher. The National Association of Realtors (NAR) reports that sales of existing homes rose in August for a third straight month despite declining inventories.

While many smaller cities had plenty of homes for sale at the start of the summer, buyers have snapped up many of them. NAR’s chief economist Lawrence Yun says home builders need to produce more houses, especially in areas that have suddenly gotten popular.

Remote work a continuing factor

NAR's recent study, the 2020 Work From Home Counties report, predicted that remote work opportunities will likely become a growing part of the nation's workforce culture. Yun believes this reality will endure, even after a coronavirus vaccine is available.

"Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities," he said. "To assure broad gains in homeownership, more new homes need to be constructed."

But homebuilders have produced only about half the number of new homes per year they built before the 2008 housing crash. They blame rising land, labor, and materials costs, as well as the cost of meeting local regulations.

Six months into the coronavirus (COVID-19) pandemic, structural changes are occurring that continue to drive up the price of a home.

Real estate brokerage firm Redfin reports that the median price of homes selling in August rose 13 percent year-over-year to a record $319,178 -- the largest increase since 2013. In the last six months, a growing imbalance between buyers and sellers has ignited housing inflation. 

The necessity to work from home has suddenly made many apartment dwellers -- especially those with families -- decide they need more space. And because many people expect to continue working remotely for the foreseeable future, there has been a migration from cities -- especially New York -- to the suburbs and beyond.

The Redfin report shows that home prices accelerated in conjunction with a big increase in sales. There was a 28 percent rise in the number of homes going under contract last month, the largest increase in five years.

Tough on first-time buyers

While sales are booming, inventory levels have continued to shrink. The number of homes on the market fell 28 percent from August 2019, which Redfin reports has been typical over the summer. Amazingly, more than 46 percent of homes sat on the market no more than two weeks before getting an offer.

The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, rose to 99.3 percent -- an all-time high and a full percentage point higher than a year earlier.

All of this is great news if you are trying to sell your house, which fewer people are doing during the pandemic. It’s not so good if you are trying to buy a home.

"Home price growth this high is making the housing market especially difficult for first-time homebuyers right now," said Redfin’s chief economist Daryl Fairweather. "Rising prices are just one more reason for people to leave expensive urban neighborhoods behind.”

Affordability still a concern

Fairweather notes that the trend of remote work may be opening opportunities for people in urban markets, where they may have good-paying jobs but still can’t afford a home. By moving to a smaller market, they may find their money goes farther and they can continue working remotely.

At the same time, he says the increase in demand for housing in smaller, secondary markets is fueling price increases in those cities.  

“Price growth may slow in 2021, but even if it does, high prices are going to continue to make affordability a concern for buyers," Fairweather said.

Consumers trying to save enough for a down payment are getting squeezed from two directions. Not only do rising prices keep moving the goalposts for a home purchase, but a recent report from Freddie Mac found that rents keep going up as well.

Just like the dwindling supply of homes for sale, the Freddie Mac report found more competition for rental units, causing the rental costs to rise faster than incomes.

The housing market is showing no signs of a slowdown heading into the fall. Mortgage applications for home purchases rose 3 percent last week from the week before and were 40 percent higher than a year ago.

The Mortgage Bankers Association (MBA) says year-over-year changes to its seasonally adjusted index rarely approach 10 percent, suggesting this year’s housing market, affected by the coronavirus (COVID-19) pandemic, is breaking the mold.

Industry analysts say the market has drawn in more buyers over the summer because of a number of factors. There has been a traceable migration from cities to the suburbs since the pandemic hit, and there has been anecdotal evidence that many people, confined to apartments for two months, have sought more room afforded by single-family homes.

At the same time, interest rates have made home purchases more attractive and more affordable. MBA reports that the average 30-year fixed-rate conventional loan rate on balances up to $510,400 is 3.07 percent. The rate on a 15-year mortgage is at a record low 2.62 percent.

More affordable

Lower interest rates are making home purchases more affordable, with real estate broker Redfin documenting how much added buying power they provide. In its latest report, Redfin found that a buyer with a $2,500 monthly housing budget can afford a home priced $33,250 higher than a year ago, just because of lower rates.

At a 3 percent mortgage interest rate—roughly the average 30-year fixed rate for July and August—a homebuyer can afford a $516,500 home on $2,500 per month, up from the $483,250 they could afford on the same budget when the average was 3.77 percent  in July 2019.

But Redfin says that extra buying power may not last. The reason? Home prices are rising almost as fast as sales.

“Low mortgage rates are motivating many people to purchase a home, particularly those who want more space to work from home," said Redfin’s chief economist Daryl Fairweather. "But because there hasn't been an increase in the number of homes for sale since rates started dropping with the onset of the pandemic, many buyers end up competing for the same homes, driving up prices.”

Because of those competing forces, buyers in highly competitive markets are in roughly the same situation as last year. Fairweather says buyers seeking a condo can usually find a better deal, both on overall price and mortgage payments, because most condos are less competitive than single-family homes as people move out of densely populated urban areas.

A lot of attention has focused lately on the fast-rising cost of homes, but a new report from Freddie Mac suggests that the real affordability crisis is affecting people who rent.

Freddie Mac’s research shows that fewer than 10 percent of rental units are affordable for households earning 50 percent of median renter income. The report focuses on income as compared to the cost of rent, screening out the growing number of high-income consumers who rent their homes.

Taking these changes in renter household composition into account, the study concludes that average renter households are not better off financially because they have had to compete for ever-more-scarce rental units. This competition has served to drive up rents as the number of available properties has declined.

“Rental affordability continues to be a major issue as demand remains high and supply of affordable housing is both insufficient and more likely to decline than it is to grow,” said Steve Guggenmos, vice president of Multifamily Research and Modeling at Freddie Mac. “Our research demonstrates the need to focus on and understand the complexities of rental affordability as we continue to address the affordable housing crisis in this country.”

Renters often earn less

The Freddie Mac researchers found that using median income numbers to determine rental affordability can be highly misleading since renters tend to earn less than homeowners. They determined that median renter income is up to four times less than the median family income.

The study also found that the number of wage earners in each renter household increased by 2.4 percent between 2010-2018. That served to increase household income without boosting the income of individual renters.

The bottom line, the researchers say, is that affordability levels have not improved but instead remain essentially flat. 

The role of COVID-19

A recent report from real estate marketplace Zillow found that the coronavirus (COVID-19) pandemic has made a bad rent affordability situation even worse. As the economy shut down in March, Zillow looked at rent affordability for households working in retail, arts, entertainment, recreation, hospitality, and food service.

The study found that these households would spend 40 percent or more of their annual income on rent after two months, far above what personal finance experts advise. 

Home sales have significantly recovered from early COVID-19 declines, but inventory levels remain historically low. The same low inventory is affecting the rental market, creating what Freddie Mac calls a shortage of affordable housing.

The situation is even worse for people at or below the poverty level. The National Low Income Housing Coalition reports that the U.S. has a shortage of seven million rental homes that are affordable and available to extremely low-income renters, whose household incomes are at or below the poverty guideline of 30 percent of their area median income. 

Only 36 affordable and available rental homes exist for every 100 extremely low-income renter households, the group found.

The coronavirus (COVID-19) pandemic has thrown millions of Americans out of work, making it difficult to pay the rent or mortgage. Forbearance programs enacted by Congress have so far kept many homeowners from facing immediate foreclosure.

Black Knight, a data analytics company, reports that mortgage delinquencies actually went down in July, falling nearly 9 percent from June. The numbers show there were about 340,000 fewer past-due mortgages than in the month before.

Even more encouraging, early-stage delinquencies -- those loans with a single missed payment -- are now below pre-pandemic levels, suggesting that the initial inflow of new COVID-19-related delinquencies has subsided.

The news is not all good, however. Serious delinquencies -- those 90 or more days past due -- increased by 376,000 and are now up more than 1.8 million from their pre-pandemic levels.

An improvement over the second quarter

All in all, it’s an improvement from the second quarter of the year, which encompasses the first three months of the pandemic when businesses closed and millions of Americans were laid off from their jobs.

The Mortgage Bankers Association (MBA) recently reported that mortgage delinquencies surged in the second quarter by more than 8 percent.

“The COVID-19 pandemic’s effects on some homeowner’s ability to make their mortgage payments could not be more apparent,” said MBA vice president of Industry Analysis Marina Walsh. “The nearly 4 percentage point jump in the delinquency rate was the biggest quarterly rise in the history of the MBA’s survey. The second-quarter results also mark the highest overall delinquency rate in nine years and a survey-high rate for FHA loans.”

Delinquencies are double 2019’s rate

The Black Knight report shows that, while the mortgage delinquency rate in July fell 8.22 percent from June, it was nearly 100 percent higher than in July 2019. Foreclosure activity remained low, largely due to mortgage forbearance programs.

The concern among policymakers is what happens this month. Many forbearance programs expired at the end of July, as did the extra $600 a week in additional unemployment benefits, which likely helped some unemployed Americans keep up with their mortgage payments.

Congress was unable to reach an agreement on a new aid package and left Washington for a month-long recess without taking action.

The coronavirus pandemic has had a severely negative impact on homeowners in recent months. While mortgage rates have been very low in recent weeks, delinquencies have been spiking since the spring.

Unfortunately, that trend appears to be showing no sign of slowing down. In a recent survey, the Mortgage Bankers Association (MBA) reported that the delinquency rate for one-to-four-unit residential properties spiked to 8.22 percent. That represents an increase of 386 basis points since the first quarter of the year.

“The COVID-19 pandemic’s effects on some homeowner’s ability to make their mortgage payments could not be more apparent,” said MBA vice president of Industry Analysis Marina Walsh. “The nearly 4 percentage point jump in the delinquency rate was the biggest quarterly rise in the history of the MBA’s survey. The second quarter results also mark the highest overall delinquency rate in nine years, and a survey-high rate for FHA loans.”

Delinquencies may remain at high levels

Walsh notes that the states that have experienced the highest rate increases for mortgage delinquencies -- New York, New Jersey, Nevada, Florida, and Hawaii -- are also areas that rely heavily on the hospitality and leisure industries. This makes sense since many workers would have lost their jobs and income as travel came to a standstill and quarantine restrictions were put in place.

While there has been some recovery in the job market over the summer, Walsh says too many financial and health uncertainties are keeping homeowners on the backfoot. They may also be forced into a corner due to uncertainty about the prospect of more financial relief coming from the government.

“There is no way to sugarcoat a 32.9 percent drop in GDP during the second quarter,” she said. “Certain homeowners, particularly those with FHA loans, will continue to be impacted by this crisis, and delinquencies are likely to stay at elevated levels for the foreseeable future.”

While things may seem particularly dire for homeowners, Walsh says it’s important to note that there are factors working in their favor. 

“Fortunately, there are several mitigating factors that make this current spike in mortgage delinquencies different from the Great Recession. These factors include home-price gains, several years of home equity accumulation, and the loan deferral and modification options that present alternatives to foreclosure for distressed homeowners,” Walsh said. 

Consumers can find more information about the MBA’s survey findings by visiting its website here.

Increases in home prices are accelerating because there still aren’t enough homes on the market, industry sources report.

Real estate broker Redfin tracked July sales and reports that the median home price rose 8.2 percent to $323,800. It’s the third record high in four months and has been driven in part by record-low mortgage rates. But the lack of inventory is also a major factor.

"The housing market is intense right now," said Jimmy Martinez, a Redfin agent in Albuquerque. "We've got about half as many homes for sale as there were at this time last year, met by a big surge in people moving here from across the country in addition to lots of local homebuyers, all of which has pushed prices up dramatically from last year."

By Redfin’s count, home prices are increasing at the fastest rate in more than two years. Prices are rising in all but one of the largest 85 housing markets that Redfin tracks. Honolulu, already one of the nation’s priciest markets, is the only metro where prices didn’t go up.

Meanwhile, the median sale price surged 16.8 percent in Birmingham, Ala., The price increased 16.5 percent in Bridgeport, Conn., and 14.3 percent in Fort Lauderdale.

Zillow confirms the price acceleration

In a separate report, real estate marketplace Zillow confirmed the price acceleration and reported that newly pending sales are up nearly 17 percent, suggesting demand could push prices even higher.

While new listings increased in July, Zillow’s housing experts say it wasn’t enough to keep up with demand. Inventory levels have fallen below where they were at this time in 2019.

Zillow reports that demand for homes is at a record pace. Newly pending sales are rising more than 1 percent from week to week. Homes that sold during the first week of August typically went under contract after 13 days, which is 11 days faster than during the same period last year and a new record low in Zillow data that dates back to the start of 2019.

Zillow found the fastest-selling large markets to be Cincinnati, Columbus, Kansas City, and Raleigh. In those markets, the average seller got a contract offer after the property was on the market for only four days.

Home prices are rising to the point that housing experts at the University of Arizona recently warned that today’s buyers may not be able to sell their property in the future. Millennials, many of whom are still paying off student loans, may not be able to afford a home if prices continue to rise.

Though the housing market has been picking up over the last few months, a new study conducted by researchers from the University of Arizona predicts that things may not be favorable for some homeowners over the long-term. 

According to researchers, older consumers who are looking to sell their homes in the years ahead could have trouble finding buyers. Their work revealed that costs associated with homeownership could prevent millennials and members of Generation Z from pulling the trigger and becoming homeowners themselves. 

“There’s this mismatch -- if those over 65 unload their homes, and those under 65 aren’t buying them, what happens to those homes,” said researcher Arthur C. Nelson. “...The vast supply is so large and the demand...is going to be so small, in comparison, that there’s going to be a real problem starting later this decade.” 

Homeowner trends are changing

To understand where the housing market is expected to turn in the next two decades, the researchers analyzed data from both the Harvard Joint Center for Housing Studies and the U.S. Census Bureau. They looked at the average age of homeowners from 2018 and then used available data to predict what the housing market will look like by 2038. 

The researchers expect that housing trends are likely to change drastically over the next 20 years, but consumers shouldn’t expect a switch to flip overnight. Based on their findings, the changes will happen slowly and will depend on the geographic region. 

In bigger, metropolitan areas, older consumers looking to sell shouldn’t have as much of an issue. However, it could become rather difficult for those in smaller, lesser known areas. The researchers explained that this trend will likely affect millions of consumers nationwide. 

“The people who own homes now in thousands of declining communities may simply have to walk away from them,” Nelson said. 

As 2040 draws closer, the researchers predict that the number of homeowners under the age of 65 is likely to be lower than it was in 2018. This is particularly concerning for older consumers, many of whom use the sale of their homes to help finance retirement plans. 

Helping older consumers

Nelson and his team have come up with several ideas that could help offset the housing burden that older consumers will face in the coming years. One plan would be to divide bigger homes into several units. This would make selling less necessary, and the full cost of living in a large home wouldn’t fall on one person. 

The researchers also believe that more government intervention could benefit both older and younger consumers -- and the housing market at large. 

“We’re going to wake up in 2025 -- give or take a few years -- to realize that millions of seniors can’t get out of their homes and that it’s going to get worse in the 2030s,” Nelson said. “We must start doing things now to reduce the coming shock of too many seniors trying to sell their homes to too few younger buyers.” 

The Fannie Mae Home Purchase Sentiment Index (HPSI) fell last month, suggesting June’s heated housing market may be cooling for the rest of the summer. If so, that could be good news for buyers who have been dismayed by rising prices and declining inventory.

The Index dropped by 2.3 points in July to 74.2 after two consecutive months of advances. Home sales were sharply higher in May and June as the coronavirus (COVID-19) shutdown appeared to shape new housing trends.

Home shopping rose sharply in small towns and suburban areas and declined in cities. But in July, there appeared to be a pause.

‘Slight step back’

Three of the six HPSI components went down month-over-month, with consumers reporting a significantly more pessimistic view of homebuying conditions but a more optimistic view of home selling conditions. Year-over-year, the HPSI is down 19.5 points.

"Following a partial recovery of the HPSI in the previous two months, consumer sentiment toward housing took a slight step back in July amid a rise in coronavirus infections across many parts of the country, including the south and southwest," said Doug Duncan, senior vice president and chief economist. 

A big part of that, Duncan says, is the fact that there are not as many homes for sale as in previous years. Consumers intuitively recognize that this will lead to home prices going up.

Because of that, fewer consumers in July said it was a good time to buy a home, even though there was broad agreement that it’s probably a good time to be a seller.

The virus is a factor

Drilling deeper into the numbers, the index shows renters, 18-to-34-year olds, and households earning less than $100,000 are the most likely to think it's a bad time to buy a home. And it’s not all because prices are going up and choices are becoming more limited.

“In months ahead, we continue to expect consumer sentiment to be closely linked to the country's progress in containing the spread of the virus," Duncan said.

While sentiment appears to have turned against a home purchase, at least for now, consumers who really want to buy a home may have a better opportunity than they think. Last week, housing and data analytics firm Black Knight reported that home affordability is at its best point since 2016.

Despite high home prices, the company says record-low mortgage rates are keeping monthly payments within the affordability range for more people. 

The price of homes has moved sharply higher over the last three months. But a new report makes the case that home affordability is the best it’s been in four years.

How could those two facts both be true? Because the cost of mortgage money has never been lower, according to Black Knight, a housing data analytics firm.

Since June 30, year interest rates have fallen to record lows. Black Knight Data & Analytics President Ben Graboske has examined the impact cheap money has had on housing and says it’s leveling the playing field for buyers.

"Despite eight consecutive years of rising home prices, July's record-low mortgage rates, which fell below 3 percent for the first time on July 16, have made purchasing the average-priced home for a median wage earner the most affordable since late 2016,” Graboske said. 

Attracting new buyers

In fact, Graboske says improved home affordability has pulled buyers into the market. He says that, in turn, prevented home prices from going into a freefall, as many predicted they would when the economy shut down in April.

In some markets, home prices are soaring. In a report this week, real estate brokerage firm Redfin said the median home sale price at the end of July was a record $315,000, an 11 percent year-over-year increase.

The price increase is being powered by strong homebuyer demand, which is 27 percent higher than just before the pandemic hit. The home shortage means those buyers are having to compete for the declining number of available homes, allowing sellers to get higher prices.

Mortgage rates offset prices

But apparently, rock bottom interest rates more than compensate for that, allowing some buyers to qualify for homes that might have been out of their price range just a couple of months ago.

"As of mid-July, it required 19.8 percent of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20 percent down payment and a 30-year mortgage,” Graboske said. “This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6 percent from the same time last year, despite the average home increasing in value by more than $12,000 during that same time period.”

In fact, the Black Knight report shows consumer home-buying power is now up 10 percent year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year while keeping their monthly payment the same.

It turns out that a pandemic is a pretty good time to sell a home, but it’s not such a good time to try to buy one.

The pent-up demand from a postponed spring homebuying season has vastly increased competition for homes and driven up prices. Real estate brokerage firm Redfin reports that the median home price of its transactions in June surged 2.8 percent to a record $311,300.

With the pace of home building still slow and fewer single-family homes coming on the market, the company says prices could continue to rise over the second half of the year.

"The coronavirus hasn't dragged home prices down; in fact we've seen just the opposite—prices are rising in spite of the pandemic," said Brian Walsh, a Redfin agent in Tampa, where the median home price was up 8 percent year over year in June. 

"Every house that is the slightest bit cute, fixed-up and priced right gets multiple offers--some up to 10 or 15. The winning offers are almost always all cash with zero contingencies."

Buyers face competition

This is an abrupt change from April when the coronavirus (COVID-19) shutdown immediately halted open house events and most home showings. At the time, the market was fairly balanced, with an absence of both buyers and sellers.

Now, buyers have returned to the housing market but sellers have not. Redfin reports that new listings dropped 11.6 percent last month, the fourth straight month of double-digit declines.

As a result, Redfin says the balance of supply and demand remains strongly tilted in sellers' favor.

Buyers were active in June, making offers on the properties that were on the market. Pending home sales -- contracts for homes that were signed but not yet closed -- were up 5.4 percent year-over-year. For Redfin properties, it was the first increase since February, though the National Association of Realtors (NAR), which collects more data, reported a 44.3 percent increase in pending sales in May.

Sales drop

The number of homes selling in June fell sharply, but only because there were fewer homes for sale. For people wanting to sell a home, the job is relatively easy. Buyers have their work cut out for them.

Real estate professionals say there are steps buyers can take, short of paying cash, to make their offer stand out. The first is to make it a “clean” offer with no contingencies. If you’re confident in knowing what the property is worth, you can even waive the appraisal contingency.

It goes without saying that you should be pre-approved for the loan amount by your lender and have a letter proving it. If you’re going to be competing with other buyers who want the home, offer above the asking price. Also, offer to put down more than the usual amount of earnest money.

You can also consider writing an escalation clause into your contract that automatically raises your bid to meet or exceed others, up to a set amount.

Finally, try to connect emotionally with the sellers. Some agents believe it is a good idea to write a personal letter to the sellers, telling them how much you appreciate their home and would love to live there. In this market, buyers apparently need any edge they can get.

After the spring homebuying season was derailed by the pandemic, home shoppers appear to be making up for lost time. Demand for mortgages is soaring, and so is confidence among buyers.

The perfect storm of pent-up demand and record-low interest rates resulted in a 5 percent increase in mortgage applications last week, according to the Mortgage Bankers Association (MBA). But compared to the same week a year ago, applications were up a shocking 33 percent.

Real estate brokers say home sales began to accelerate in mid-May after worries about the coronavirus (COVID-19) resulted in both a dramatic decline in listings and fewer people looking for homes. As stay-at-home restrictions were lifted, the shoppers came out in droves.

Homebuying sentiment

That trend is borne out by the latest Fannie Mae Home Purchase Sentiment Index (HPSI), which jumped 9 points in June. Four of the index’s six components increased over May, with consumers reporting a significantly more positive view of homebuying and home-selling conditions, as well as greater optimism regarding home price appreciation.

"A second month of improvement in June allowed the HPSI to regain some of the sharp losses in optimism observed in March and April," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The share of renters who say it's a good time to buy a home is now at its highest level in five years, suggesting favorable conditions for first-time homebuying.”

A number of factors could be responsible for that increase. Two months of quarantine in a small apartment could be prompting some people to seek more space that a single-family home provides. It’s also possible that buyers now realize they don’t have to live close to where they work since they can work from home, and they may be seeking homes in more affordable markets.

Low inventory levels

While the number of potential buyers has increased, sellers remain scarce. Inventory levels, especially in the more affordable entry-level segment of the market, remain near historic lows, but Duncan says that may be about to change.

“Homeowners seem to have taken note of the resulting lack of housing supply, with an increased share saying it's a good time to sell a home,” he said. 

The idea of selling may be more attractive now because the shortage of homes for sale is continuing to push home prices higher. The National Association of Realtors (NAR) reported that the median home price in May was $284,600, up 2.3 percent from May 2019. The inventory of available homes is down more than 18 percent from 2019.

Not surprisingly, the Fannie Mae survey found that the percentage of homeowners who believe now is a good time to sell rose from 32 percent to 41 percent, suggesting more homes could soon be coming on the market.

Meanwhile, growing competition for the limited number of homes for sale means buyers need to secure the lowest mortgage rate possible. ConsumerAffairs has collected reviews on some of the best mortgage companies here.

The cost of financing a home has never been lower. Freddie Mac reports that the average 30-year fixed-rate mortgage hit a record low last week.

The rate fell to 3.07 percent, a decline of six basis points from the previous week but more than a half-point lower than the first week of July in 2019.

In reporting on the rate decline, Freddie Mac said mortgage rates could drift even lower over the next few weeks. Before the end of the year, it says the average rate could fall below 3 percent for the first time.

“On the economic front, incoming data suggest the rebound in economic activity has paused in the last couple of weeks with modest declines in consumer spending and a pullback in purchase activity,” Freddie Mac said in a statement explaining the trend.

Rates are linked to bond yields

Mortgage rates are keyed to the yield on the 10-year U.S. Treasury bond. Bond yields have remained near historic lows during the coronavirus (COVID-19) pandemic as investors have sought a safe haven from economic uncertainty.

Lower mortgage rates tend to make homes more affordable since they lower the monthly payment. Lowering your rate by 1 percent on a $160,000 mortgage can trim the monthly payment by nearly $100.

Lower rates, plus pent-up demand from the coronavirus shutdown earlier this year, has sparked a sharp increase in home sales. The National Association of Realtors (NAR) reported last week that pending home sales rose more than 44 percent in May. 

“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”

‘Spectacular recovery’

Despite the increase in sales, Joel Kan, associate vice president of Economic and Industry Forecasting at the Mortgage Bankers Association (MBA), says mortgage applications paused in late June, falling nearly 2 percent from the previous week.

“The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers' options,” Kan said. “The average purchase application loan size increased to a record high in our survey - more proof that tight inventory conditions are leading to faster price growth." 

Shopping around for the mortgage with the best terms and the most attractive rate will pay off over the life of the loan. To make that process easier, ConsumerAffairs has collected reviews on the top mortgage lenders here.

Mortgage delinquencies are rapidly rising amid widespread and sudden unemployment caused by the coronavirus (COVID-19).

It’s hard to separate missed payments that are allowed under forbearance programs for government-backed mortgages from those outside those programs, but what is clear is the number of homeowners who feel they can’t keep up is surging.

An analysis by Black Knight, a real estate data firm, shows that the total mortgage delinquency rate in May rose 20.43 percent from April 2020 and 130.78 percent from May 2019. Another 723,000 homeowners fell at least 30 days behind on their mortgages last month, pushing the national delinquency rate to its highest level in more than eight years.

At the end of May, 4.3 million homeowners were past due or in active foreclosure -- including those in forbearance who have missed scheduled payments as part of their plans -- up from 2 million at the end of March.

Geography plays a role

Geography also seems to play a role. The five states with the largest percentage of overdue mortgages were in the South and Northeast. 

The states with the smallest percentage of troubled mortgages are in the Midwest and Pacific Northwest.

The number of homeowners more than 30 days past due, in what are classified as serious delinquencies, is also sharply higher. The Black Knight analysis shows these troubled homeowners have increased by more than 50 percent since the pandemic shutdown began.

Not as serious as 2009

Despite that worrisome trend, the housing market is nowhere as precarious as it was in the wake of the financial crisis, which was caused by a crashing housing market that was overwhelmed by a tsunami of foreclosures.

At the end of May, there were only 5,100 foreclosure starts, down 31 percent from April and nearly 87 percent lower than May 2019. Forbearance programs may be responsible for that.

The number of homes being prepared for foreclosure sales was also lower last month, making up a fractional portion of housing inventory. The number was down nearly 23 percent year-over-year.

In fact, The share of homeowners in active foreclosure has fallen to its lowest level on record since Black Knight began reporting the figure in January 2000.

Like nearly every industry, real estate got hammered by the coronavirus (COVID-19). Showings, listings, and sales slammed to a halt in March and April.

But with the lifting of stay-at-home restrictions, the real estate market appears to be on a strong rebound. In fact, a number of recent signs point to the market making up for lost sales, and then some.

Confidence is surging among home builders. The National Association of Home Builders’ (NAHB) index that tracks builder confidence jumped 21 points this month to 58. Any reading above 50 indicates a positive market.

“As the nation reopens, housing is well-positioned to lead the economy forward,” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J. “Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. Buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”

Fewer homes for sale

Inventory dried up during the shutdown, but so did the demand for houses. Now, it appears home buyers are out in full force at the tail-end of a mostly wiped out spring home-buying season.

That’s caused some regions of the country to experience a sharp rebound in sales. West Penn Multi-List, a real estate services firm serving Western Pennsylvania, reported that sales in four counties amassed a combined $135.5 million in May -- even with real estate offices open in only the second half of the month.

“It’s the hottest market I have ever seen,” Tom Hosack, president of West Penn Multi-List, told Trib Live.

Bidding wars

Redfin, a real estate brokerage service, is seeing the same signs of a rebound on a national level. It reports that nearly half of its agents’ sales in May had multiple offers, a sign that there are more buyers than sellers presently.

"We're seeing a frenzy," Boston Redfin agent Delince Louis said. "Any home below $500,000 is receiving multiple offers; we just don't have the supply to meet the demand."

"Bidding wars also jumped in May because homebuyers felt they were starting to get more clarity around where the economy was headed, with cities around the nation lifting stay-at-home orders. This gave house hunters more confidence to compete," said Redfin lead economist Taylor Marr. 

But Marr isn’t convinced the resurgence is sustainable, saying it all depends on whether the coronavirus stays under control or spikes up in states that have lifted restrictions. It’s also possible that we’re seeing sales that were simply delayed by the pandemic. Future sales could face some hefty headwinds.

The Mortgage Bankers Association (MBA) reported last week that there was a significant drop in the amount of available credit for mortgages as lenders tried to limit risk. Even though mortgage rates are at record lows, it’s increasingly challenging to qualify for a mortgage, with lenders demanding larger down payments and higher credit scores.

If you’re in the market for a home, ConsumerAffairs has collected thousands of reviews of mortgage companies here. To determine what your monthly payments would be, check out our mortgage calculator here.

The average 30-year fixed-rate mortgage fell to a record low -- below 3 percent -- last week, but unfortunately, it is also getting harder to be approved for a mortgage.

A report by the Mortgage Bankers Association (MBA) shows mortgage credit availability -- a measure of the amount of money mortgage companies are willing to lend -- fell even more during May.

Credit availability began shrinking in late March when the economy shut down and millions of people lost their jobs. Mortgage companies immediately tightened their lending standards, fearing the surge in unemployment increased the risk of mortgage defaults.

‘Increased risk and uncertainty’

Each month MBA analyzes data from Ellie Mae's AllRegs Market Clarity business information tool to arrive at a number that indicates which way standards are moving. That number fell by 3.1 percent to 129.3 in May, indicating that standards for getting a mortgage are getting tougher.

"Mortgage lenders in May responded accordingly to the increased risk and uncertainty in the economy,” said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting. “Credit availability continued to decline, with MBA's overall index now at its lowest level since June 2014."  

Kan says there was a reduction in supply across all loan types, driven by a further pullback in investors' appetites for loan programs for consumers with low credit scores. But credit also got tighter for more affluent borrowers, who take out larger loans to finance more expensive homes.

Lenders began demanding higher credit scores and larger down payments, requirements that affected first-time buyers as well as those moving up to expensive homes.

Implications for buyers and sellers

This trend carries broad implications for both buyers and sellers. Buyers may not be able to secure financing to buy the home they want. With fewer buyers, sellers may see their homes sit on the market for far longer than usual. Fewer buyers also mean less competition that would normally make homes sell for more.

While some 30-year fixed-rate mortgages are still below 3 percent to start the week, Bankrate reports that the average is 3.39 percent, down 13 basis points from a week ago. In mid-May, the average rate on a 30-year fixed mortgage was higher, at 3.52 percent.

Consumers who fail to qualify for a mortgage because of tighter standards have time to improve their position. The Federal Reserve predicts rock bottom mortgage rates are likely to last for at least a couple of years.

In the meantime, prospective buyers can raise their credit score by making sure they pay every bill on time and reducing the amount of their credit card debt.

Mortgage rates have plunged since the start of 2020, and they fell again to another record low last week, according to the Mortgage Bankers Association (MBA).

At the same time, demand for mortgages to purchase a home spiked, rising 5 percent from the previous week and 18 percent over the same week in 2019.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less fell to 3.37 percent from 3.42 percent, with points decreasing to 0.30 from 0.33 for loans with a 20 percent down payment. The effective rate decreased from last week. 

At the same time, the average 30-year fixed-rate FHA mortgage went up slightly, to 3.46 percent from 3.41 percent the previous week.

Mortgage rates have fallen from 4.68 percent in January 2019. They’ve gone down in part because the yield on Treasury bonds fell consistently during that period, settling at 0.72 percent.

Surprising number

The report’s biggest surprise was the number of new applications for mortgages to buy homes. Overall, applications were down slightly because fewer homeowners were refinancing mortgages.

But applications for loans to purchase homes soared in the last week of May. It coincided with the lifting of some coronavirus (COVID-19) restrictions in several states.

"The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring," said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting. "However, there are still many households affected by the widespread job losses and the current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months."

Predicted bounce back

The National Association of Realtor (NAR) had predicted a bounce back in home sales after activity virtually disappeared in April and most of May. 

“The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales,” said Lawrence Yun, NAR’s chief economist. “But the listings that are on the market are still attracting buyers and boosting home prices.”

NAR reported that April’s decline in existing-home sales -- down 22 percent -- was the largest month-over-month drop since July 2010.

Yun said he expects record-low mortgage rates to remain in place for the rest of the year. He also predicts that potential home sellers waiting out the pandemic will list their homes for sale by late summer, helping to alleviate low inventory levels.

Homeowners hammered by the economic fallout from the coronavirus (COVID-19) are already having trouble making their mortgage payments.

Mortgage delinquencies increased in April by 1.6 million, the largest one-month increase ever. Black Knight, the data analytics firm that compiled the report, says it’s more evidence that the millions of people thrown out of work by the virus-related economic shutdown are struggling to pay bills.

The April numbers pushed the mortgage delinquency rate from 3.06 percent in March to 6.45 percent last month. According to Black Knight, no other single month on record comes close to that increase, not even in the aftermath of the 2008 financial crisis.

The number of homes that were 30 or more days past due in April, but not in foreclosure, totaled 3,400,000. That’s 1,588,000 more than in April 2019.

Where delinquencies are highest

According to Black Knight, the five states with the largest percentage of delinquent mortgages in April were:

• Mississippi -- 11.90 percent

• Louisiana -- 10.91 percent

• New York -- 9.79 percent

• New Jersey -- 9.36 percent

• Connecticut -- 8.94 percent

April delinquencies include homeowners who have enrolled in mortgage forbearance plans, established under the CARES Act. Borrowers with loans backed by Freddie Mac or Fannie Mae can defer mortgage payments for up to a year, with the missed payments added to the end of the loan.

Last month, the Mortgage Bankers Association (MBA) reported that the percentage of mortgage loans that were placed in forbearance rose from 2.73 percent during the last week of March to 3.74 during the first week of April.

Struggling homeowners interested in enrolling in a forbearance program should contact their loan servicer to see if they qualify.

Worst on record

In an interview with USA Today, Black Knight Director of Market Research Andy Walden said it took a year and a half before the financial crisis produced a 1.6 million increase in mortgage delinquencies.

“The impact of COVID-19 on the housing and mortgage markets has already been substantial," Walden says. "It will be some months before we can gauge the full extent of that impact. Whatever the ultimate scope, it is almost certain the effects will resonate for many months to come.”

The damage may not be over, as the Labor Department reports that an additional 2,438,000 people filed initial claims for unemployment benefits in the previous week. The report shows more than 25 million people continue to draw jobless benefits.

We’re still a few days away from the National Association of Realtors’ (NAR) existing-home sales report for April, but RE/MAX, a national brokerage firm, has provided an early glimpse of what the coronavirus (COVID-19) did to the housing market last month.

In its monthly report, RE/MAX found home sales were down an average of 20.2 percent year-over-year in April, the first full month of coronavirus stay-at-home orders. The report covers 53 U.S. markets in which RE/MAX operates.

But while buyers disappeared last month, so did sellers. The report found inventory levels plunged 20 percent as sellers decided to wait before listing their homes for sale. Because of that, home prices didn’t fall -- in fact the median sale price was up nearly 10 percent from April 2019.

‘Better than expected’

The stay-at-home restrictions turned one of the busiest home sale periods of the year into one of the slowest. Four major markets -- New York, Detroit, Miami, and San Francisco -- posted sales declines of more than 40 percent. Only two markets -- Minneapolis and Billings, Mont. -- reported sales increases.

"April results were better than many expected, as consumers continued to buy and sell real estate in one of the most challenging months for housing in memory," said Adam Contos, RE/MAX CEO. "This was a headwind like no other – yet we still saw activity across the country. Even in the markets that dropped 40 percent in sales, people wanted or needed to move, which says something about resiliency and the power of homeownership."

The numbers appear to confirm earlier projections that sales will continue to fall through mid-summer but will snap back in the late summer and early fall due to pent-up demand. Even with the expected rebound, experts believe home sales will be down 15 percent for the year. 

Other expected trends include a migration out of large urban markets and into smaller cities, where density is lower and housing is more affordable.

New listings needed

For the housing market to remain balanced, however, there needs to be an increase in available homes to meet that anticipated demand. Research from NAR suggests that the supply will be there.

In its survey, NAR found about 77 percent of potential sellers plan to put their homes on the market once stay-at-home orders are lifted. Half of this group used the stay-at-home period to perform do-it-yourself projects to make their homes more attractive to buyers.

“After a pause, home sellers are gearing up to list their properties with the reopening of the economy,” said NAR Chief Economist Lawrence Yun. “Plenty of buyers also appear ready to take advantage of record-low mortgage rates and the stability that comes with these locked-in monthly payments into future years.”

Without an increase in inventory, home prices could soar. The RE/MAX report shows April’s median sale price of $276,000 was a record for the month. Should supply and demand get too far out of balance, home prices could go even higher.

Reverse mortgage closings, which often entail in-person meetings, are being affected by the coronavirus pandemic. However, several new working conditions have unfolded in the wake of the health crisis which have allowed reverse mortgage lenders to continue conducting business. 

Ami Kellogg, president of Premier Reverse Closings (PRC) based in Roseville, Calif., said social distance guidelines have led her company to ramp up efforts to make work-from-home plans a reality. 

“Our American Land Title Association (ALTA) best practices we had already put in place years prior to COVID-19 allowed us the ability to work remote efficiently,” Kellogg told Reverse Mortgage Daily. “The use of the ResWare platform has been a huge benefit to our remote work. The staff that work from home chose the decision to work remote mainly due to childcare issues and/or their school age children sent home to distance-learn due to school closures.”

Kellogg said PRC has taken steps to ensure the safety of employees that must come into the office in order to receive loan packages, scan, and disburse files, such as making hand sanitizer available and making hand washing a required hourly task. 

Changes that have been made

While virus mitigation efforts remain active, PRC is making sure that all loan packages are individually sanitized when they arrive in the office. All packages are handled with gloves and aren’t picked up again until they’re fully dry. 

Online meetings have taken the place of in-person meetings, which enables employees to keep working during this unprecedented time. For notaries, curbside signings are being used.  

Another change PRC has seen is an uptick in attempted wire fraud. Kellogg told RMD that fraud attempts to divert loan payoff funds are on the rise as the nation continues to battle the coronavirus pandemic. 

“Phishing emails are also higher than ever, so people should be cautious and careful,” she said. 

Kellogg said she’s optimistic about the rest of the year because Home Equity Conversion Mortgages orders have increased. PRC predicts “a better-than-projected order count for 2020,” which will allow the firm to bring on more employees.   

“I have seen many new opportunities these past six weeks, created by strong communication, staying positive and caring for each other,” Kellogg said. “We are essential. Together, we can do this.”

For more information about reverse mortgage lenders, visit ConsumerAffairs guide here.

Normally, early April is the kickoff to the housing market’s biggest season. But the coronavirus (COVID-19) pandemic has created a perfect storm that has made it more difficult to either buy or rent a home.

A recent Zillow analysis shows the pandemic has done more than stopped buyers from looking at homes. It’s stopped sellers from putting their homes on the market.

At the beginning of March, the market looked like it was going to be one of the most competitive in memory, with sales actually rising in January and February. Then the stay-at-home orders began to spread across the country along with the virus.

The number of new listings on the market in early March was 17 percent higher than a year earlier, reversing a persistent decline in inventory. By early April, Zillow reports new listings had fallen 27 percent.

Less bargaining power for buyers

That return to shrinking inventory means buyers have fewer homes to choose from and will have less bargaining power, assuming they find a home they’d like to purchase.

"It is clear that many would-be home sellers are adopting a wait-and-see approach as uncertainty continues to rule,” said Skylar Olsen, senior principal economist at Zillow. “Our understanding of U.S. economic conditions is changing weekly, if not daily, and early unemployment figures are striking, so it's understandable that some are hesitant to put their home on the market."  

Making matters worse, the coronavirus has sidelined homebuilders. Housing starts plunged 22 percent in March, meaning builders’ contributions to housing inventory will be even smaller than before.

Even if a buyer is able to find a home to purchase, getting a mortgage has suddenly gotten more difficult, even as mortgage rates plunge to record lows. Because of the economic dislocation caused by the pandemic, lenders have become a lot more choosy.

Last week, JPMorgan Chase tightened its underwriting requirements for most residential mortgages, demanding a minimum FICO score of 700 and a 20 percent down payment. Wells Fargo raised the minimum score to 720.

“The large banks, including JPMorgan Chase, are moving significantly to looking at credit risk and looking at loan portfolios where they need to assess potential delinquencies and possible charge-offs,” Ken Leon, director of equity research at CFRA Research, told NBC News.

Lockdown logistics

Even if you can qualify for a mortgage, the logistics of a lockdown situation may work against you. A Brookings Institute report highlights a number of steps in the mortgage process that are nearly impossible to complete because they require in-person visits to perform title searches and appraisals.

Even people trying to rent a home are being affected. Online rental platform TurboTenant reports that there was a sharp drop in residential rental listings in the last month. Atlanta saw the biggest impact of any metro, with listings falling 27.45 percent during the first week of April.

New York, Denver, and Houston all experienced large net losses for new listings, with New York holding the biggest decrease by falling 65.17 percent.

Besides sending cash payments to Americans, the CARES Act allows homeowners suffering from the economic impact of the coronavirus (COVID-19) to put off making mortgage payments for up to a year. A new industry report shows many people are doing just that.

The Mortgage Bankers Association (MBA) reports that the percentage of mortgage loans that were placed in forbearance -- meaning they don’t have to be paid right away -- rose from 2.73 percent during the last week of March to 3.74 during the first week of April.

That might not sound like a big move, but it is. It’s a 37 percent increase in just seven days, and it shows just how many people have been thrown out of work by the mitigation efforts to slow the spread of the virus. 

"The nationwide shutdown of the economy to slow the spread of COVID-19 continues to create hardships for millions of households, and more are contacting their servicers for relief in accordance with the forbearance provisions under the CARES Act," said Mike Fratantoni, MBA's senior vice president and chief economist.

Call center volume rose

Fratanoni says there was also a surge in call center volume to go along with the rising number of loans in forbearance, with homeowners asking to place their loans on hold.

"The share of loans in forbearance grew the first week of April, and forbearance requests and call center volume further increased. With mitigation efforts seemingly in place for at least several more weeks, job losses will continue and the number of borrowers asking for forbearance will likely continue to rise at a rapid pace."

Under the law, homeowners are able to seek forbearance on their federally-backed mortgage, allowing them to skip principal and interest payments for 180 days. At the end of that time, they are able to seek relief for another 180 days.

The skipped principal and interest payments are added to the end of the loan, so they will eventually be paid back.

Liquidity issue for lenders

An analysis by Black Knight, a data analytics firm, suggests this sharp rise in mortgage forbearances could present liquidity issues for some lenders. It shows that the forbearance requests are inundating servicers' operations and will require payment of billions of dollars per month in principal and interest advances to government-backed securities holders.

If just 5 percent of homeowners seek forbearance, servicers would need to pay more than $2.1 billion in principal and interest per month to security holders. So far, there’s no indication of how many people will try to stop paying their mortgages, but the MBA’s numbers show it could be staggering, calling into question its long-term sustainability.

Black Knight CEO Ben Graboske notes there was no mandate for mortgage forbearance during the 2008 financial crisis, and previous programs have been offered on a smaller scale in local disaster areas. He says the current situation represents uncharted waters.

"Trying to gauge the impact of COVID-19 on mortgage performance is as much an art right now as a science," said Graboske. "The fact is that there is no true point of comparison in the nation's recent history for analysts to model against.

If you can qualify for a loan and find a house you’d like to live in, then there may have never been a better time to buy a home. Mortgage rates have sunk to an all-time low, according to Freddie Mac.

“The average 30-year fixed-rate mortgage hit a record 3.29 percent this week, the lowest level in its nearly 50-year history,” said Sam Khater, Freddie Mac’s chief economist.

These low rates have caused a surge in mortgage applications -- particularly applications to refinance existing mortgages at a lower rate.

“Given these strong indicators in rates and sales, as well as recent increases in new construction, it’s clear the housing market continues to be a positive force for the broader economy,” Khater said.

Freddie Mac reports that the 15-year fixed-rate mortgage averaged 2.79 percent. A year ago, it was 3.83 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.18 percent, down from last week when it averaged 3.20 percent. A year ago at this time, the 5-year ARM averaged 3.87 percent.

The record might not last

It’s entirely possible those record low rates could go even lower.

Mortgage rates are falling because they are directly tied to the yield on the 10-year Treasury bond, which has cratered in the last week. Early Friday, the yield fell to 0.77 percent -- a record low -- because investors who fear the economic impact of the coronavirus are selling stocks and buying bonds. 

Rising demand for bonds means the U.S. Treasury Department doesn’t have to pay as much interest, so yields fall when demand rises.

Mortgage rates this low might lead to a surge in home sales under normal circumstances, but the U.S. housing market continues to suffer from extremely low inventory. There aren’t enough homes on the market.

But a big drop in interest rates might make some homes more affordable. For potential buyers on the edge of entry-level homes or slightly more expensive homes, the lower monthly payments that a lower interest rate provides could make a difference and provide more options.

Employment

Meanwhile, concerns about the economic fallout from the coronavirus could also give potential buyers pause. The Labor Department today reported that U.S. employment surged by 273,000 jobs in February, well ahead of consensus estimates.

But the February report reflects almost no effects from coronavirus fears and therefore provides little insight for the future. In fact, one of the biggest increases in employment last month came at bars and restaurants -- businesses expected to suffer as wary consumers shun public spaces.

In interviews with USA Today, a number of hiring managers have said they have already postponed hiring plans until they can determine the economic impact of the coronavirus.

The Mortgage Bankers Association (MBA) reports that the number of homeowners seeking to refinance their mortgages last week surged by 26 percent, one of the largest one-week gains ever.

The reason? Mortgage rates are plunging, and it all has to do with the fear generated by the coronavirus.

Home loan rates are keyed to the yield on the 10-year Treasury bond. As fear swept Wall Street that the virus would derail the economy, billions of dollars flowed out of the stock market and into Treasury bonds.

Because there was so much demand for these notes, the government could pay less interest. On Tuesday, the yield on the 10-year note fell below 1 percent for the first time ever. That makes today’s low mortgage rates even lower.

More than a point lower than last year

According to MBA, the average mortgage rate is now around 3.57 percent, compared to about 4.67 percent a year ago. That caused a 26 percent spike in mortgage applications compared to the previous week -- a startling increase of 224 percent more than the same week in 2019.

"The 30-year fixed-rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility. Refinance demand jumped as a result, with conventional refinance applications increasing more than 30 percent," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. 

"Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize."

Should you refinance your mortgage?

But whether you should rush to refinance your mortgage depends on a couple of factors -- your current interest rate and how long you expect to live in your home before moving. That’s because there are always costs involved when you replace one loan with another. They can be high or low depending on the mortgage company.

According to our housing experts at ConsumerAffairs, you might encounter these costs when you refinance:

• Closing costs: Closing costs amount to 2 percent to 5 percent of the home loan and include application fees, lender fees, attorney fees, escrow deposits and fees, courier fees, homeowners’ association transfer fees, inspection fees, and title insurance.

• Mortgage points: Sometimes called discount points, mortgage points are optional fees paid to your lender in exchange for a lower interest rate. Each point is equal to 1 percent of the mortgage loan.

• Prepayment penalties: A prepayment penalty is a fee that some lenders charge when a borrower pays their mortgage loan off early, either through refinancing or overpaying each month. The average prepayment fee is 80 percent of six months of interest.

A typical rule of thumb is that you should refinance your mortgage if you can reduce your interest rate by at least 1 percent. However, smaller savings can be justified in some cases if there are very low closing costs.

Secondly, experts say you probably need to stay in the home for at least five years for the savings in interest to offset the cost of refinancing the mortgage.

ConsumerAffairs has collected thousands of consumer reviews of the best mortgage companies here.

Anecdotal evidence suggests buyers were getting an early start on home shopping last month, but the sales numbers haven’t borne that out. More people may have been looking, but they weren’t buying.

Sales of existing homes fell 1.3 percent from December, pulled down by a significant drop in home sales in the western states, according to data from the National Association of Realtors (NAR). However, home sales were up 9.6 percent from January 2019.

Lawrence Yun, NAR's chief economist, isn’t all that discouraged by the lackluster start to the 2020 home-buying season. 

"Existing-home sales are off to a strong start at 5.46 million," Yun said. "The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales."

Good economic conditions

Economic conditions are ripe for a surge in home sales. Unemployment is low, and wages have been steadily rising. Mortgage rates have hovered just below 4 percent.

What may be depressing sales is the lack of available homes to purchase. Zillow recently reported that housing inventory hit a seven-year low in December.

The report showed inventory was down year-over-year in 31 of the 35 largest U.S. housing markets, with Seattle, San Diego, and Sacramento seeing the largest drawdowns. The exceptions to shrinking inventory are San Antonio, Detroit, Atlanta, and Chicago -- the only markets where inventory actually increased over the last 12 months.

Even if shoppers can afford a home, there is no guarantee they will find one to their liking in their price range with the inventory at these levels. That means potential January sales could have been put off a couple of months, or longer.

Real estate brokerage firm Redfin reports that a majority of its agents faced competing offers when they tried to help clients buy homes in January. The company said competition is “spiking early and hard in 2020.”

Fewer homes, higher prices

Yun says inventory levels are down more than 10 percent from 12 months ago, and that lack of supply, coupled with increasing demand, is causing prices to rise at a faster rate. The median home price last month was $266,300, 6.8 percent higher than January 2019. Home prices have now risen year-over-year for 95 straight months.

"Mortgage rates have helped with affordability, but it is supply conditions that are driving price growth," Yun said.

Declining inventory isn’t helping. In January, total housing inventory was 1.42 million homes, nearly 11 percent lower than a year ago. That’s the lowest level since January 1999.

As the 2020 home buying season gets underway, prospective buyers are finding the most attractive mortgage rates in years. Current homeowners can also take advantage of the low rates if they refinance.

Freddie Mac reports the average 30-year fixed-rate mortgage rate has fallen to a three-year low, reaching 3.51 percent last week. It was 4.46 percent a year ago. The average 15-year fixed-rate mortgage fell to 3 percent, while the average 5-year Treasury-indexed hybrid adjustable-rate mortgage is 3.28 percent.

Sam Khater, Freddie Mac’s chief economist, says the drop in rates has led to a flurry of home shopping activity as well as a sharp increase in refinancing. 

“Borrowers who take advantage of these low rates can improve their cash flow by lowering their monthly mortgage payments, giving them more money to spend or save,” Khater said.

Why rates are falling

Mortgage rates are falling because they are tied to the yield on the 10-year Treasury bond, and that rate fell even further last week to below 1.6 percent. Lower rates attracted more applicants for loans, with the Mortgage Bankers Association (MBA) reporting a 7.2 percent increase in consumers seeking mortgages to buy or refinance homes.

Joel Kan, MBA's associate vice president of Economic and Industry Forecasting, says borrowers are benefitting from concern about the economic impact from China's coronavirus outbreak, in addition to existing concerns over trade and other geopolitical risks. Those worries are driving bond rates lower and mortgage rates are falling as a result.

"With the 30-year fixed rate at its lowest level since November 2016, refinances jumped 7.5 percent,” Kan said. “Purchase applications grew 2 percent and were 17 percent higher than the same week last year. Thanks to low rates and the healthy job market, purchase activity continues to run stronger than in 2019."

Lower monthly payments

Lower mortgage rates can make buying a home more affordable since monthly payments will be lower. But as we’ve previously reported, finding a home to buy this year could be a bigger challenge. A recent analysis by Zillow shows the inventory of available homes hit a seven-year low in December.

The lower rates might be a bigger benefit to current homeowners who refinance their mortgages. An analysis from Black Knight, a company that crunches financial numbers, shows the average homeowner could save $272 per month by refinancing their mortgage at present rates.

Since loans normally carry closing costs, whether you should consider refinancing depends on a number of factors, including your present rate and how long you plan to live in the home.

Greg McBride, Bankrate’s chief financial analyst, says refinancing could pay off if you can reduce your present rate by one-half to three-quarters of a percent. But he cautions that you probably need to stay in the home for at least a couple of years to justify the cost of refinancing.

If you’re considering refinancing, ConsumerAffairs has collected thousands of reviews of mortgage companies here.

Consumers hoping to purchase a home in 2020 may find the task more difficult than they thought. Despite predictions that more homes would come onto the market, Zillow reports that the inventory of available homes hit a seven-year low in December.

Actually, it might be longer than that since Zillow didn’t start collecting inventory data until 2013. For all practical purposes, inventory could be at an all-time low.

As we reported 11 months ago, there was growing optimism that inventory levels were rising. Zillow says there was a widespread belief that more homes for sale would reverse the falling inventory trend, but the increase just didn’t last. Zillow attributes inventory gains to a temporary stock market dip and a spike in mortgage rates, two trends that are keeping buyers out of the market.

But now mortgage rates have fallen to near-record lows, and consumer confidence posted gains throughout 2019. Realtors report a big increase in home traffic this month from buyers not willing to wait until spring. That might turn out to be a sound strategy since there may be fewer homes on the market by April.

Inventory levels already falling

Zillow reports inventory is down year-over-year in 31 of the 35 largest U.S. housing markets, with Seattle, San Diego, and Sacramento seeing the largest drawdowns. The exceptions to shrinking inventory are San Antonio, Detroit, Atlanta, and Chicago -- the only markets where inventory actually increased over the last 12 months.

"The end of 2019 looks a whole lot different than we might have expected at the beginning of the year," said Skylar Olsen, director of economic research at Zillow. 

Not only are there fewer homes for sale, Olsen says that decline will likely cause prices to rise faster than they did last year, making affordability an issue for more buyers.

The value of the median home grew 3.7 percent in 2019 to $244,054, a slight slowdown from the previous 12 months. Home values were up 6.5 percent in Phoenix, leading the nations. Columbus, Ohio and Charlotte, N.C. were close behind.

Home values fell in only two markets, but they happened to be the nation’s most expensive markets -- San Jose and San Francisco.

Continuing to rent is also an increasingly expensive option. Zillow reports the typical rent is $1,600, up 2.6 percent in 2019 but flat from November. Phoenix and Charlotte, two markets where home prices increased the most, also saw the biggest increases in rent last year.

A new report from online real estate marketplace Zillow shows renters spent a combined $4.5 trillion since 2010 to put a roof over their head.

That statistic puts recent changes in the housing market into sharper focus as many prospective buyers can’t find homes they like or can afford. As a result, the demand for rental housing has risen, along with rents.

Zillow reports that U.S. renters will have spent more than $512 billion on housing by the time 2019 ends in a couple of weeks -- the most of any year during this decade. The current median rent is $1,600, a 2.3 percent increase over 2018.

That trend may continue in 2020. Forbes reports that the number of renters has increased by more than 9 million during this decade and now makes up 34 percent of all U.S. households. Renters have increased faster than homeowners, growing more than twice as fast, according to the Census Bureau.

Voluntary renters

Forbes also notes another housing trend that could add to the demand for rental housing. It cites data which shows that more high-income consumers and seniors have voluntarily become renters because they’re able to afford more expensive luxury apartments.

All of this suggests renters may have to pay more next year for housing, but Zillow Group Economist Joshua Clark says that’s not a given.

"While the total amount of rent paid has increased each year this decade, that trend is by no means immutable," he said.  "With rental appreciation expected to decrease in the coming year and a homeownership rate that has been ticking up over the past few years, a small or even negative change in total rental spending could be in the cards in the early 2020s."

Extremely low vacancy rates

But Harvard’s Joint Center for Housing Studies reports that even with recent softening of rental demand, vacancy rates remain “at decades-long lows,” and that affordability is a growing issue. One bright spot, it says, was Minneapolis’ recent move to end single-family zoning, which the center says could greatly expand the supply of rental homes.

Rents and home prices are both going up for the same reason -- declining inventory. In the last year, that factor pushed home rental costs up 6.4 percent in Phoenix, 5.2 percent in Las Vegas, and 4 percent in Charlotte. And because there are fewer homes to purchase, more consumers continue to rent, reducing the number of available units. But the housing market got some good news in that regard this week.

The Commerce Department reports that housing starts rose 3.2 percent in November, the biggest increase in more than 12 years. That suggests builders are in the process of adding to the inventory of available homes, which has been shrinking during this decade.

The Zillow report shows rents were highest -- both this year and throughout the decade -- in the New York, Los Angeles, and San Francisco metros. Renters in New York spent $56.6 billion on rent in 2019, compared to $39.2 billion in Los Angeles and $16.4 billion in San Francisco.

Predictions that falling inventory levels would heat up the housing market in 2020 might already be coming to pass, according to a new industry report.

Online real estate marketplace realtor.com reports that the number of homes for sale in November fell nearly 10 percent year-over-year, several months ahead of previous forecasts. One big reason, the company says, is the recent drop in mortgage rates.

"As millennials -- the largest cohort of buyers in U.S. history -- embrace homeownership and take advantage of this year's unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish," said George Ratiu, realtor.com’s senior economist. 

Making matters more difficult for these first-time buyers is the fact that they’re seeing the largest shortage of available homes at the entry-level of the market, where most millennials are looking to become homeowners for the first time.

"The issue is further compounded by the fact that sellers tend to be more reluctant to list during the colder time of year when the market typically makes a seasonal slowdown," Ratiu said.

Fewer bidding wars

As we reported last month, real estate brokerage firm Redfin’s 2020 housing forecast predicts the market will heat up by mid-year. But so far, Redfin hasn’t seen nearly as many “bidding wars” over houses as last year.

Outside of San Francisco, Redfin said it found little evidence of competition, with no other market seeing a bidding war rate higher than 17 percent. The bidding war rate hit its lowest point in at least five years in November in Chicago, Houston, Portland, Ore., and Los Angeles. 

"Even though the number of homes for sale has been falling faster than we normally see this time of year, buyers just aren't feeling any sense of urgency right now," said Redfin chief economist Daryl Fairweather. "The supply and demand data still says that it's a seller's market, but homebuyers working with Redfin agents in places like Portland and Denver are feeling and acting like they're in control.”

Shortages picking up speed

But based on realtor.com's listing data, the shortage of available homes for sale has already picked up speed, which suggests that the housing market could get more competitive early in 2020. For example, national housing inventory fell  9.5 percent in November, compared to October's drop of 6.9 percent.

The falling inventory numbers may increasingly pose a problem for first-time buyers if the biggest decline remains in the category of the most affordable homes. The supply of homes priced below $200,000 dropped 16.5 percent year-over-year in November, up from the 15.2 percent decrease seen in October. 

Renters can expect housing costs to rise and availability to decline in 2020, according to housing experts.

A new report from real estate marketplace Zillow shows average rent increased year-over-year each month from July through October. In October, the average rent was $1,600 -- an increase of 2.3 percent over October 2018.

While Zillow estimates rents grew throughout the country, its report focuses on the 35 largest metro areas. Rents declined in only two of them -- Columbus, Ohio and Houston. In markets where rents are growing, Zillow found they’re growing faster than in 2018.

Rents and home prices are rising for the same reason -- declining inventory. That pushed home rental costs up 6.4 percent in Phoenix, 5.2 percent in Las Vegas, and 4 percent in Charlotte. And because there are fewer homes to purchase, more consumers continue to rent, reducing the number of available units.

Warning from Harvard researchers

In June, a study by the Harvard Joint Center for Housing Studies warned that the U.S. housing supply is falling far short of what’s needed, especially since a good economy has encouraged an increase in household formation.

Chris Herbert, managing director of the Joint Center for Housing Studies, says building activity has dropped off for a number of reasons. However, he says the most significant reasons are rising land prices and regulatory constraints on development.

“These constraints, largely imposed at the local level, raise costs and limit the number of homes that can be built in places where demand is highest,” Herbert said. “Meanwhile, a large percentage of new housing being built is intended primarily for the higher end of the market. The limited supply of smaller, more affordable homes in the face of rising demand suggests that the rising land costs and the difficult development environment make it unprofitable to build for the middle market.

Fewer affordable homes

The middle market is the segment that is encountering the most difficulty putting a roof over its head. Zillow reports that the inventory decline in October was sharpest in the bottom-third of the market, which is down 9.4 percent year-over-year. 

"Despite some fearful headlines, the U.S. economy keeps on trucking, and that is reflected in the continued rent growth across the country,” said Zillow Director of Economic Research Skylar Olsen. “The unemployment rate remains near record lows and wage growth keeps adding to renters' pocketbooks."

Over the last few years, a number of red hot housing markets saw the fastest growth in rents. If the last few months are any indication, Olsen says growing demand and limited supply of rental housing could become a national story.

The sluggish housing market is about to pick up speed again, according to real estate brokerage firm Redfin.

Sales slowed in the first half of 2019 as rising mortgage rates, along with rising home prices, kept many would-be buyers on the sidelines. Redfin researchers predict that dynamic will shift early in 2020.

"Low mortgage rates started to revitalize the market at the end of this summer, but we won't see their full impact on demand for housing until next year," said Redfin chief economist Daryl Fairweather, who authored the report. "In 2020, buyers will have fewer homes to choose from than they have had in five years.”

Low inventory levels and more buyers entering the market will probably bring a return of bidding wars, especially in sought-after markets and neighborhoods. Fairweather says that’s good news if you plan to sell your home, but it will make it a little harder to buy a home, at least in the short term. But things could change quickly.

“The competition and faster price growth will tempt more homeowners and builders to list homes, which will help improve the balance between supply and demand by the end of the year," Fairweather said.

Interest rates are the key

The key to next year’s housing market is interest rates. Redfin expects the 30-year fixed-rate mortgage to stabilize at around 3.8 percent. If economic growth remains sluggish, the Federal Reserve will be expected to keep interest rates low.

Stable mortgage rates under 4 percent will coax more consumers to consider purchasing a home. And with inventory levels near all-time lows, that’s bound to lead to bidding wars, which were common in the housing market in 2017 and 2018. Redfin says that could happen in the first quarter.

That means prices are going to go up. The increase in competition should push year-over-year price growth up to 6 percent in the first half of the year, considerably stronger than the 2 percent growth seen in the first half of 2019. 

Redfin says the market should even out later in the year as supply and demand become more balanced and higher prices encourage more sellers to put their homes on the market.

People tend to purchase homes in the spring, which is why it’s called the “spring home-buying season.” They don’t call it the winter home-buying season.

But maybe they should. A new data analysis from ATTOM Data Solutions suggests that winter is the best time to purchase a home if you want to secure the best deal possible -- and it makes sense. In the spring, buyers have the most competition for homes and might even encounter a bidding war, which could encourage sellers to hold out for their listing price. With less competition in winter months, buyers have a little more leverage.

When ATTOM Data Solutions looked at home closings all year round, they found only three days in which buyers got homes priced below the estimated market value. All three days were in December.

The day after Christmas is ideal

The analysis shows buyers who closed the day after Christmas got the biggest discount from the full market value. Researchers reached that conclusion after looking at more than 23 million home sales over the last six years.

"Closing on a home purchase the day after Christmas or on New Year's Eve can be one of the most financially beneficial holiday-season gifts you can get," said Todd Teta, chief product officer with ATTOM Data Solutions. "While lots of folks are shopping the day-after Christmas sales or getting ready to ring in the New Year, our data shows that buyers and investors are buying homes on those days at a discount.”

Granted, the discount isn’t huge. On December 26, buyers save about $500 on the purchase of a median-priced home. But when you’re buying a house, every little bit helps. On the other hand, buyers who wait until June to close on a house will end up paying a 7 percent premium, Teta says.

Home experts at Nationwide Insurance agree that winter is one of the best times to buy a home, but they say autumn is also a good time. The approach of the holidays, they say, distracts potential buyers so that there is less competition.

In the end, that reduced competition may be the biggest benefit from fall and winter home-shopping. It increases the likelihood that you’ll get the home you want without another buyer swooping in at the last minute and offering a higher price.

Homeowners are staying in their homes a lot longer than they used to, and aging-in-place may be driving the trend, according to a new report from real estate brokerage company Redfin.

In 2010, the typical homeowner spent eight years in their home before moving on. Nine years later, the Redfin report found that the average homeowner was staying 13 years in one place. The measure of time spent in the median home went up in all 55 metros Redfin studied.

Homeowners have increased the time they remain in their homes the most in Salt Lake City, Houston, Fort Worth, San Antonio, and Dallas, with homeowners in those metros staying in their homes for more than 20 years on average.

"In Dallas, there are many neighborhoods that were built in the 1950s and 1960s where most of today's residents are still the original homeowners," said Dallas Redfin agent Christopher Dillard. "Because prices have been going up, and folks are gaining more and more equity, it's hard to justify selling when there aren't many if any affordable options."

And one reason there aren’t that many affordable options is the fact that people are waiting longer to sell their homes. That has contributed to declining inventory, which has hit first-time buyers especially hard.

Older homeowners are reluctant to move

The report indicates that older homeowners appear especially reluctant to move. Over the years, many local jurisdictions have enacted tax policies that have made it more affordable to retire in place.

In Texas, homeowners over the age of 65 can defer property taxes until their home is sold. According to Redfin, that’s one reason Texas homeowners tend to move the least.

Many baby boomers have expressed a strong desire to “age in place,” staying in their homes instead of moving into assisted living facilities. They’re invested in major renovations, such as enlarged bathrooms with safety features and amenities like walk-in tubs.

That adds to the housing market’s acute shortage of homes. By Freddie Mac’s calculations, homeowners between the ages of 67 and 85 are holding onto their homes longer, creating a shortage of 1.6 million homes for sale.

San Francisco is a case in point

Redfin says the median homeowner in San Francisco, one of the country’s most expensive housing markets, has been in their home for 14 years. Not coincidentally, there are about half as many homes on the market in San Francisco than there were in 2010. That helps make the homes that are on the market a lot more expensive.

Finally, homeowners who live in desirable neighborhoods are less likely to put their homes up for sale. Homes with walkable access to shops and parks are desired by young couples who would like to buy them for the same reason they are valued by the older people who still live in them. They’re convenient and add to their quality of life.

Despite a drop in interest rates, the U.S. housing market faltered in September, with existing home sales falling 2.2 percent. The previous two months had shown increases in sales, according to the National Association of Realtors (NAR).

Compared to September 2018, when mortgage rates were much higher, sales were up a healthy 3.9 percent. NAR’s chief economist Lawrence Yun says robust sales in July and August have reduced the level of available homes for sale.

"We must continue to beat the drum for more inventory," said Yun, who has called for additional home construction for the last 12 months. "Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential."

Increasing home prices

The drop in inventory is having an impact on prices. NAR reports the median price for all existing homes -- including condos -- was $272,100 last month. That’s a 5.9 percent increase over September 2018. In fact, the rise in the median home price in September marks 91 straight months of year-over-year gains in home prices.

Housing inventory is down for the year, but it remained  at about the same level in September as it was in August. The inventory of unsold homes amounts to a 4.1-month supply at the current sales pace. A six-month supply is considered to be a healthy housing market.

NAR statistics show first-time buyers accounted for a third of sales last month, a slightly better showing than in August. The improvement is encouraging since first-time buyers are considered to be key to growth in the housing market. Lower inventories of entry-level homes in recent years have provided barriers to this key consumer group.

RE/MAX reports sales surge

Meanwhile, a much smaller industry report shows a big increase in home sales in September. National real estate broker RE/MAX reports that its September home sales surged 8.1 percent compared to September 2018.

Sales were up in 47 of the 54 markets covered by the report. But on the downside, that big increase in sales caused inventory levels to record the biggest drop of the year, falling 6.1 percent year-over-year.

“It was encouraging to see the improvement in September home sales, especially given how tough last September’s results were,” said RE/MAX Holdings CEO Adam Contos. 

But Contos admits the market still presents some challenges for buyers heading into the end of the year. But while prices are going up and inventory levels are going down, he says the industry is on a better footing than it was at this time last year.

A real estate industry source is sounding the alarm over the declining number of entry-level homes for sale, warning that signs point to another housing shortage.

Home inventory levels dropped sharply after the market began to recover from the housing market crash of 2009, and demand for homes surged beyond the available supply. Inventory levels hit a low in early 2017 but began to recover.

Now, a new report from realtor.com says the inventory of homes is shrinking once again. The recent drop in mortgage rates has improved affordability and sent more would-be buyers into the market. But the report says these new buyers are once again finding fewer homes to choose from.

In particular, there are fewer homes for first-time buyers. Realtor.com reports the number of listings priced under $200,000 plunged 10 percent last month from September 2018. But in a worrisome trend, the overall inventory of homes fell by 2.5 percent.

Shortage of mid-market homes

Until recently, mid-market homes, those priced from $200,000 to $750,000, have lingered on the market because there were plenty of them. Also, homebuilders have focused on the upper price range since the housing recovery began a decade ago. While a home priced over $400,000 may take longer to sell, a home priced under $200,000 sells almost as soon as the sign goes up in the yard.

Now that difference is more blurred. Home shoppers in all price ranges are having to look beyond their first choice neighborhoods.

"Buyers looking for their next home have faced the headwinds of tight inventory and a competitive market this year,” said George Ratiu, senior economist for realtor.com. “While lower mortgage rates and the arrival of fall promised a reprieve, conditions continue to tighten as demand remains strong.”

Canary in the coal mine

While it’s understandable that the inventory of entry-level homes would be lower because of heightened demand, Ratiu says the decline in mid-market homes for sale “may be the canary in the coal mine,” adding that we could be headed for even lower levels of inventory in early 2020.

A declining inventory of homes for sale is more than just a frustrating nuisance for homebuyers, it can distort the housing market by making homes more expensive than they should be. While it might be good for current homeowners -- their home equity will grow quickly -- it could make it harder for some consumers to become homeowners.

The problem is just the opposite of the housing market woes a decade ago. Then, a flood of foreclosures produced higher than normal inventory levels that caused home prices to eventually fall.

Recent turmoil in the financial markets has had an unexpected benefit for people hoping to buy a home and current homeowners who may want to refinance. Mortgage rates have dropped sharply in just the last few days.

While the average 30-year fixed-rate mortgage was 3.75 percent in late September it dropped to  3.62 percent late last week. That might not sound like much of a decline but according to CNBC, it could save about $225 a month on a $300,000 mortgage.

That makes homes, which are still going up in price, a little more affordable than they might be otherwise. The Mortgage Bankers Association (MBA) says that’s led to an uptick in mortgage applications.

“Borrowers responded to these lower rates, leading to a 14 percent increase in refinance applications," said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting. "Although refinance activity slowed in September compared to August, the months together were the strongest since October 2016. The slight changes in rates are still causing large swings in refinance volume, and we expect this sensitivity to persist."

You can thank the stock market

The early October rout on Wall Street, which sent the Dow Jones Industrial Average tumbling 800 points in just two sessions, may get some of the credit for lower mortgage rates. The sell-off sent Treasury bond yields lower, which in turn put downward pressure on mortgage rates since bond yields heavily influence the interest rate on mortgages.

The lower rates not only make a home purchase slightly more attractive; they also encourage homeowners to refinance their mortgages, giving them the opportunity to lower their monthly payment or take out some equity and keep their payment the same.

Mortgages News Daily reported this week that refinancing now makes sense for about 8 million homeowners due to the recent drop in mortgage rates . According to Credit Karma, refinancing an existing mortgage makes sense if you can lock in a rate that is 1 percent or more below your current rate.

More than 1 percent lower than a year ago

Consumers may be a good candidate for refinancing if they took out a mortgage last November. Just 11 months ago, the average fixed-rate 30-year mortgage had a 5 percent interest rate.

There are other considerations, including closing costs. Consumers might have to stay in their homes for another two years or more to recoup those costs with a lower rate. The lower the closing costs, of course, the more profitable it will be to refinance at a lower rate.

Young people tend to change residences more than households made up of older consumers, but new research shows millennials are also moving more often than their older peers did when they were young.

A new data analysis by Zillow shows that 33.8 percent of people between 25 and 34-years-old had lived in their home for less than two years in 1960. In 2017, that percentage jumped to 45.3 percent.

That’s in line with previous research which showed that millennials are more willing to relocate to new cities if it means a better job opportunity and more affordable housing. Over the last decade, young people have moved to smaller metro areas like Columbia, S.C, Norfolk, Va., and Omaha Nebraska. 

As The Atlantic reported last month, millennials’ propensity to pack up and go is having a political effect. These younger, more liberal voters are leaving large metro areas in blue states and settling in smaller cities in states that, in the past at least, have typically voted Republican.

Shifting demographics

Younger adults have always lived in their homes for shorter tenures than older Americans as they start out in their careers and begin to settle into adult life. But Zillow researchers say the reasons for moving may be different now.

"Shifting demographic headwinds and evolving workplace norms have significantly altered the housing decisions of young adults today,” said Sarah Mikhitarian, senior economist at Zillow.  “Untethered from family and enticed by new job opportunities, young adults are more mobile today than they have been over the past nearly 60 years."  

The job market has also undergone a drastic change since 1960. Then, someone might get a job and stay in it, in the same location, for decades. Mkhitaryan says things are very different now.

"Rather than climbing a corporate ladder, many are choosing to hop from one role or function to the next, often requiring a move to a new location," she said.

Not going that far

That said, over half of young adults who decide to move out of their homes are not setting out for new horizons. According to Zillow, 53.5 percent are simply moving across town, often buying a larger home to accommodate a growing family or to be closer to work.

Today’s young adults are also more likely to be renters rather than homeowners, the result of massive student loan debt and the recent escalation of home prices.

A new report from REMAX Realtors underscores the imbalances in the housing market that are making it harder for first-time buyers to find a home.

The REMAX National Housing Report shows sales of existing homes dipped 1.6 percent year-over-year in August and were down 4.2 percent from July. But the report’s authors note that the decline wasn’t because consumers weren’t interested in buying a house. Instead, they found fewer homes to buy.

In fact, the report shows the demand for homes was greater than the number of listings, causing what REMAX calls the largest inventory decline in 13 months. 

Influx of buyers reduced inventory

The REMAX analysis covers 53 major metro areas in the U.S. In those markets, it found that the inventory of available homes shrank 5.5 percent from a year ago, the largest decline since July 2018. Inventory levels were down 1.5 percent, snapping a streak of monthly inventory increases. The new trend could be troubling for the housing market.

"The modest inventory growth that started last fall has been swallowed up by demand as buyers have returned to the market, likely spurred on by attractive interest rates," said RE/MAX CEO Adam Contos. "Home sales dipping at the same time inventory falls suggests there may have been some reluctance on the part of sellers to list their homes.”

There is also the issue of fewer new homes being built, particularly those in the entry-level price range, though there is finally some good news on that front. Housing starts rose 7.7 percent in August; building permits rose even more quickly, at 12.3 percent.

“These are the best numbers in more than a decade and show a great jobs situation combined with good raises, high consumer optimism and low mortgage rates for the foreseeable future have spurred the home building industry,” said Robert Frick, corporate economist at Navy Federal Credit Union. 

Fewer homes under $300,000

But Frick concedes that the available stock of new homes priced under $300,000 continues to be low. That’s significant because the $300,000 price point is what half of new home buyers can afford.

Contos says that sellers continue to hold an advantage over buyers in this market because demand is outpacing supply.

While there were fewer sales in August, homes that did sell went for more money. The median price was up 5.7 percent year-over-year, which REMAX says is evidence of strong demand from buyers. Homes stayed on the market an average of 44 days last month, the second-fastest pace of August home sales in the report’s history.

The median home price, based on recorded sales, rose to $263,000. It was the eighth straight month of year-over-year price increases, though the price was lower compared to July.

It isn’t just the price of homes that is going up -- rents are getting more expensive too, creating hardships for people just beginning a career.

If that career involves teaching, then the burden is even heavier. A new survey from real estate marketplace Zillow shows new teachers are having to spend more than half of their salaries to rent a home in 19 of the nation’s 50 largest metro areas. That’s a huge problem because personal finance experts advise consumers not to allocate more than 30 percent of their income to pay rent or a mortgage.

A new teacher in San Francisco or San Jose -- two of the nation’s most expensive housing markets -- are simply out of luck. Rents there would take 100 percent of their salary, the Zillow study says. Even relatively affordable markets like Salt Lake City, Minneapolis, and Raleigh are hard on new teachers. To rent an apartment in those markets, it would take half of a new teacher’s pay.

Roommate?

Zillow’s advice to new teachers? Get a roommate or move in with Mom and Dad. Other than that, finding a job in Pittsburgh might be an answer since that city is the only one in the top 50 that a starting teacher can afford.

"Most acknowledge that building more homes is required to address the root cause of eroding housing affordability,”said Skylar Olsen, Zillow's director of economic research. 

“Without that new influx to take the pressure off rent and aggressive home value growth, it's the public servants, like teachers, firefighters, and nurses – the professions that keep us safe, our kids smart, and our families healthy – that often feel the pinch most."

Not enough new homes

Homebuilding is about half what it was a decade ago before the housing crash. Today’s major homebuilders -- many of them publicly traded companies -- have focused on more expensive homes that fewer and fewer consumers can afford because profit margins are higher.

Zillow says teachers who are somehow able to purchase a home are in better shape financially. The company reports that new teachers pay less than 27 percent of their income for the typical mortgage payment nationally. They spend less than 30 percent of their income on housing in 31 of the 50 largest housing markets.

New and existing home sales went in opposite directions last month, but a closer examination reveals what they had in common. Many homes -- both new and existing -- are now simply out of reach for first-time homebuyers.

On the other hand, falling mortgage interest rates could help those buyers on the margins qualify for a home purchase and spur sales.

The government reports that sales of new homes plunged 13 percent in July, but the slowdown might not be as severe as it seems. June’s new home sales were revised sharply higher, so some of July’s sales might have been pushed back to the previous month.

Robert Frick, corporate economist for Navy Federal Credit Union, says falling mortgage rates could breath new life into a slumping housing market. 

“But the numbers reflected the core problem holding the home sales market from regaining momentum: the average sales price for a new home was $388,000, and half of home buyers are looking for a sub $300,000 home,” Frick said in an email to ConsumerAffairs. “Until more, less expensive homes and condos come to market, millions of Americans will be shut out of homeownership.”

Same issue with existing homes

That fact seemed to jump out of last week’s existing home sales report from the National Association of Realtors (NAR). Sales rose 2.5 percent from the month before, but the inventory of entry-level homes -- those priced around $200,000 or less -- remains very tight. The lack of supply has had the effect of pushing up the price of those formerly low-priced homes.

"Clearly, the inventory of moderately-priced homes is inadequate and more home building is needed," NAR Chief Economist Lawrence Yun said last week.

Why aren’t builders responding?

Following World War II, Levitt & Sons builders responded to a severe housing shortage by developing a huge parcel in Nassau County, N.Y. into a planned community of small, affordable homes for returning servicemen and their families. Levittown was duplicated across the country, giving birth to suburbia and alleviating the housing shortage. So why hasn’t something like that happened today?

There could be a number of reasons, but builders blame rising costs for their emphasis on high-end luxury homes. After paying for land, materials, and labor, the profit margin is much higher on a home that costs $300,000 than one selling for $200,000. 

The problem, however, is that the market is running out of people who can afford to pay $300,000 or more for a home.

The sputtering real estate market showed new signs of life in July as sales of existing homes rose 2.5 percent from the month before. Year-over-year sales also increased but less dramatically, rising 0.6 percent from July 2018.

Home sales slowed down in the first half of 2019 as mortgage rates increased last year and home prices kept rising, pricing a growing number of would-be buyers out of the market. But  Lawrence Yun, NAR's chief economist, says conditions for buyers have improved.

"Falling mortgage rates are improving housing affordability and nudging buyers into the market," Yun said.

But there are still obstacles for first-time buyers. The inventory of entry-level homes -- those priced around $200,000 or less -- remains very tight. The lack of supply has had the effect of pushing up the price of those formerly low-priced homes.

Cheaper homes getting more expensive

A NAR analysis of homes purchased in 2012 and sold again last year makes that point. During that six-year period, 50 percent of the homes -- those in the lower half price-wise -- doubled in value in markets like Atlanta, Denver, Miami, and Tampa. Homes in the more expensive half of those markets increased in value at a much lower rate.

"Clearly, the inventory of moderately-priced homes is inadequate and more home building is needed," said Yun. "Some new apartments could be converted into condominiums thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration (FHA) mortgages to buy condo properties."

Eighty-nine months of price increases

The median existing-home price for all housing types in July was $280,800, up 4.3 percent from July 2018. July's price increase marks the 89th straight month of year-over-year gains.

As affordability becomes an issue for more prospective buyers, The Wall Street Journal reports that mortgage lenders are beginning to loosen mortgage underwriting standards and making loans to more risky borrowers. Many lenders have already resumed the approval of loans for 100 percent of the value of the property.

Both practices were abandoned a decade ago in the wake of the housing market crash. Making loans to buyers with little or no credit led to a wave of foreclosures. Loans for 100 percent of the home’s value trapped millions of otherwise solvent homeowners “underwater” when home values went down, and they could neither sell or refinance their homes.

The Mortgage Bankers Association (MBA) reports that home mortgage applications surged 21.7 percent last week from the week before. Refinancing made up a large portion of the increase.

MBA’s Refinance Index increased 37 percent from the previous week to its highest level in three years as existing homeowners rushed to take advantage of falling interest rates.

"The 2019 refinance wave continued, as homeowners last week responded to extraordinarily low mortgage rates,” said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting.

Trade war fears have pushed yields on U.S. Treasury bonds to below 2 percent, and it’s those yields that influence mortgage rates. When yields fall, so do interest rates on mortgages.

Lowest since November 2016

MBA reports that the 30-year fixed rate mortgage rate fell eight basis points last week to 3.93 percent -- the lowest level since November 2016 -- and has now dropped more than 80 basis points this year.

"In just the last two weeks, rates have decreased 15 basis points and the refinance index has increased more than 50 percent, reaching its highest level since July 2016,” Kan said. “The government refinance index, driven by a 25 percent increase in VA refinance applications, is now at its highest level since May 2013."

Lucky and smart

Holden Lewis, NerdWallet’s home expert, says refinancing almost tripled compared to a year ago, and consumers who grasp the opportunity are both lucky and smart.

“Lucky because the recent Fed rate cut reminded homeowners to check current mortgage rates — which happened to be at three-year lows last week. Smart because those homeowners didn't wait for rates to fall further; they pounced and applied to refinance instead of timing the market,” Lewis said in an email to ConsumerAffairs. 

“Mortgage rates have rebounded a bit in the last week, but even so, millions of homeowners could save money by refinancing. That includes most people who bought homes in 2018. Seriously, even if you bought your home last year, you could save money by refinancing right now.”

In addition to reducing their monthly mortgage payment, many consumers took out equity in their homes to use for other purposes, something that could have a stimulative effect on the economy as an inverted yield curve this week flashed a recession warning.

The MBA weekly report shows the refinance share of mortgage activity increased to 61.4 percent of total applications from 53.9 percent the previous week.

Quicken Loans, which gauges home values based on appraisal data, reports that the average home value increased 0.6 percent in July, rising at a 4.75 percent annual rate.

The Quicken Loans Home Value Index (HVI) for July hit its highest point since January 2007. Eighteen months later, home values crashed to kick off a financial crisis and the Great Recession.

Home values rose in every region last month, with the Northeast getting the biggest bump -- a 1.34 percent increase. Homes in the South only increased by 0.04 percent.

"The fact that July had the highest Quicken Loans Home Value Index since January 2007 has to be encouraging, especially to those who were deeply underwater during the worst of the recession," said Bill Banfield, Quicken Loans’ executive vice president of Capital Markets. "The 1 percent drop in interest rates so far this year will help address affordability but the strength of the economy and a lack of new homes being built will also play a big role."

Mortgage debt rising

While appraised home values are rising, so is mortgage debt. U.S. mortgage debt has hit a record high, according to the New York Federal Reserve Bank’s report on household debt. The amount consumers owe on their homes now exceeds the previous record set in 2008, just before the housing market crash.

Mortgage balances, the biggest part of household debt, rose by $162 billion in the second quarter to $9.4 trillion. The previous high was $9.3 trillion in the third quarter of 2008. 

An analysis of the report by The Wall Street Journal suggests that one reason for the surge in mortgage debt is a wave of refinancing, in which homeowners are taking cash out of their homes to use for other purposes -- a trend that also occurred just before the 2008 housing market crash.

Michael Feroli, chief U.S. economist at JPMorgan Chase, told The Journal that the amount of mortgage debt isn’t necessarily a sign of trouble because incomes have been rising at a rate to support it.

Lending standards are tighter than they were in 2008, with lenders closely documenting income and employment stability. At the same time, banks have begun offering more 100 percent financing packages, part of the reason so many homeowners were trapped “underwater” 11 years ago when home values plunged.

The cost of renting a home continued to rise in June even as home values appeared to level off. Rents have gone up nine months in a row.

The June Zillow Real Estate Market Report shows the median rent rose 3 percent over the last 12 months to $1,483. Rents rose in 49 of the nation’s top 50 housing markets, with only Milwaukee recording a decline.

Rents’ rate of increase hasn’t been this strong since 2016 when housing experts voiced concern that rents were becoming unaffordable for a growing number of consumers. That sparked a building boom in apartment construction, which was expected to saturate the market. That hasn’t happened.

"As much as record numbers of new apartments led many to believe that rental markets might have become over-saturated with new supply, the reality is that demographics and general economic health continue to keep the pressure on," said Zillow Director of Economic Research Skylar Olsen. "Yes, we saw rents fall in 2018, but that was driven by the concentration of supply in urban areas and large buildings at higher end price points competing against each other.”

Affordable apartments needed

What the market needs, Olsen says, are affordable rental units across many housing markets. She says the demand for that kind of rental housing is intense.

“Show me a three-bedroom apartment in a small building located near good schools and I'll show you an older millennial with kids ready to move in," Olsen said.

But contractors may not be building affordable apartments for the same reason they aren’t building as many affordable single-family homes. Costs of land, labor, and materials have gone up, squeezing margins on lower-priced homes.

Inventory declining again

There seems to be plenty of homes, both for sale and for rent, that many consumers can’t afford, but there are far fewer homes in an affordable price range. In June, inventory of all rental property fell 0.8 percent -- the fourth straight decline.

Home values, which can influence rental costs, were slightly higher in June after a slight dip during the spring home-buying season. Zillow pegs the value of the typical home at $227,700, up slightly from May. On a year-over-year basis, home values grew 5.2 percent in June, down from 7.6 percent in June 2018.

Home values increased the most in Salt Lake City, Indianapolis, and Charlotte, while typically expensive West Coast markets showed little change.

Home closings plunged in June, signaling weakness in the housing market, but maybe not a weakness in the traditional sense. The price paid for the average home keeps going higher.

According to the latest RE/MAX National Housing Report, the number of sales closing last month fell 4.7 percent from May and 7.8 percent year-over-year. That’s notable for a couple of reasons.

First, it’s a sizable decline, both from one month to another and over a 12-month period. Second, June is typically the strongest month of the year for home sale closings as families try to get moved and settled before a new school year starts.

In fact, June has recorded the most sales each of the last five years. It’s only the second June in report history to have fewer sales than May.

Can’t be blamed on inventory

So what happened? This drop can’t be blamed on a lack of available homes for sale. The inventory of homes rose 1.3 percent over June 2018. Inventory rose for the ninth straight month, and the report's 54 metro areas had the most units for sale since August 2016.

Instead of a shortage of homes, the cost of purchasing one may have kept buyers on the sidelines during the spring home-buying season. The RE/MAX report shows June’s median sale price was $276,000 -- the highest ever in the 10-year history of the report.

"Record prices appear to have kept June sales figures from topping a strong May," said RE/MAX CEO Adam Contos. "Nevertheless, there are indications, including the return of very favorable mortgage rates, that the pace could pick up in July.”

But mortgage rates rose last week

So far, however, there’s little evidence of that happening. Mortgage rates rose last week and total mortgage applications fell 1.1 percent, according to the Mortgage Bankers Association (MBA).

"Mortgage rates increased across the board, with the 30-year fixed-rate mortgage rising to its highest level in a month to 4.12 percent, which is still below this year's average of 4.45 percent," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Coming out of the July 4th holiday, applications were lower overall, with purchase activity slipping almost 4 percent.”

Despite the rise in rates and drop in mortgage applications, Contos sees some encouraging longer-term trends for the housing market. Demand for homes has held steady and now inventory levels are increasing. But he admits that supply remains a concern and that home builders need to produce more homes.

At a time when the economy is flashing recession signals, the housing market appears to be getting back on track.

The National Association of Realtors (NAR) reports that pending home sales rose a robust 1.1 percent in May. Pending home sales provide a leading indicator, reflecting contracts signed but not yet closed. They suggest July’s home sales figures will be higher than in recent months.

Contracts increased in three of the four regions of the country, with only the west showing a slight decline in May contracts. Lawrence Yun, NAR’s chief economist, says falling mortgage rates spurred the May increase.

"Rates of 4 percent and, in some cases even lower, create extremely attractive conditions for consumers,” Yun said. “Buyers, for good reason, are anxious to purchase and lock in at these rates."

Growing confidence

Yun said the strong pending sales number for May is in line with other data, which suggests that consumers are more confident about buying a home. That confidence had been shaken in recent months because mortgage rates have risen, along with home prices.

Yun said there’s no guarantee rates will fall further, but he noted that the market isn’t dependent on that happening. He says a hot job market and a rise in inventory will pull more would-be buyers off the sidelines in the months ahead.

Low inventory -- the lack of available homes -- has been a huge headwind for the housing market since 2016. But inventory levels in most regions of the country have been on the rise so far in 2019.

More home-building needed

"Home builders have not ramped up construction to the extent that is needed," Yun said. "Homes are selling swiftly, and more construction will help keep home prices manageable and thereby allow more middle-class families to attain ownership opportunities."

The hottest housing markets in the nation have cooled a bit in recent months while in May, activity shifted to some often-overlooked metros. According to realtor.com the hottests U.S. housing markets in May were Rochester, N.Y., Fort Wayne, Ind., Lafayette-West Lafayette, Ind., Boston-Cambridge-Newton, Mass., and Midland, Texas.

The spring home-buying season has gotten off to a slow start in 2019, but it appeared to gain a little traction in May. Sales of existing homes rose for the first time in two months, according to the National Association of Realtors (NAR).

Sales closing in May rose 2.5 percent from April’s lackluster showing, but figures were down 1.1 percent from May 2018. The increase was likely spurred by pent-up demand from the two previous months, as well as another factor working in buyers’ favor -- interest rates have fallen below 4 percent again.

"The purchasing power to buy a home has been bolstered by falling mortgage rates, and buyers are responding," said Lawrence Yun, NAR’s chief economist.

Home prices still rising

While the cost of a mortgage went down last month, the cost of a house kept going up. NAR reports the median existing home price for all housing types in May was $277,700, up 4.8 percent from May 2018. It was the 87th straight month of year-over-year price increases.

Inventory has been a primary cause of rising home prices since there remains more demand for housing than the available supply. Inventory levels have increased slightly in recent months; in May, available homes were up 2.7 percent from 12 months earlier.

A lack of available homes usually means homes sell faster than they did in the past, even in markets where sales have slowed in recent months. In May, the average home stayed on the market only 26 days, which was two days longer than April.

In May, inventory levels amounted to a 4.3 months supply of available homes, up slightly from a year ago. But Yun says the pool of available homes is still too small. "Solid demand and inadequate inventory of affordable homes have pushed the median home price to a new record high," he said.

Not enough homes for sale

Yun says the market continues to be shaped by a growing housing shortage, the mirror image from a decade ago when a wave of foreclosures produced a glut of unsold homes. Since then, homebuilders have been less active, building fewer houses, especially in the lower-priced, entry-level price range.

"More new homes need to be built," Yun said. "Otherwise, we risk worsening the housing shortage, and an increasing number of middle-class families will be unable to achieve homeownership."

When it comes to the housing market, conditions that favor a buyer don’t always favor a seller. Right now, most consumers seem to think it’s a good time to be a seller.

A new survey by the National Association of Realtors (NAR) shows a big rise in optimism in the current quarter among home-sellers. Forty-six percent of homeowners said now is a good time to put a house on the market, up from 37 percent in the first quarter.

There could be several reasons for that sentiment. For one, home inventories remain constrained, giving buyers fewer choices and creating competition for those houses that are for sale. NAR Chief Economist Lawrence Yun says the rise in home prices has slowed in recent months, providing another incentive to sell now.

"With home price appreciation slowing, home sellers understand that the days of large price gains from holding an extra year are over," Yun said.

Not such a good time to buy

Fewer consumers believe now is a particularly good time to buy a home, but 38 percent strongly believe it is. Nearly as many believe now isn’t a good time to make a move, about the same as in the first quarter.

Consumers in the survey are more optimistic about the economy than many economists. Fifty-five percent of those polled said that the economy is improving, a slight increase from the first quarter. However, many economists have recently suggested that the economy could slow from effects of escalating trade tensions.

Broken down demographically, over half of Gen Xers said they believe the economy is improving, which is also up from 50 percent in the last quarter. Yun said Gen Xers are at a time in their lives when they may be feeling more financial pressures.

"Many in the Generation X population find themselves needing to purchase multi-generational homes,” Yun said. “Also, they may be feeling financial stress from caring for aging parents and children of all ages. Nonetheless, they have an optimistic outlook about the future."

Changing home values

Some of that optimism may be tied to the recent sustained increase in home values. Sixty-three percent of those in the survey believe home prices have risen in their communities in the last 12 months, which increases the net worth of homeowners.

The outlook is considerably different among consumers who do not currently own a home. Twenty-seven percent think it would be “very difficult” to qualify for a mortgage because of their financial situation, with another 30 percent saying it would be “somewhat difficult” to qualify.

Yun predicts mortgage affordability will improve in the months ahead because of falling mortgage interest rates and rising wages.

Consumers house-hunting during the spring homebuying season have had the wind at their backs in terms of mortgage rates. They fell last week for the sixth straight week, according to Freddie Mac.

The 30-year fixed-rate mortgage has fallen to 3.82 percent from a recent high above 4 percent -- the lowest level since 2017. The 15-year fixed-rate mortgage fell to 3.20 percent while the 5/1-Yr ARM dipped to 3.52 percent.

The seemingly-small decline in interest rates can have a big impact on home affordability since it means a lower monthly payment. By shopping around and getting a single additional mortgage rate quote, Freddie Max estimates a borrower can save an average of $1,500 over the life of the loan.

Affordability has been a major impediment to the housing market in recent months, with industry experts singling it out as the main reason the housing market has slowed. But that now appears to be changing.

Countering rising prices

"Lower mortgage rates, higher wages and more homes for sale have helped counteract rising home prices, and ultimately, made it so that buyers are able to afford more than last year," said Danielle Hale, realtor.com 's chief economist.

But Hale says the rise in affordability has yet to translate into more home sales. She says many buyers may be staying on the sidelines a bit longer in hopes rates will fall further.

Kevin Parker, vice president of Mortgage Originations at Navy Federal Credit Union, says they shouldn’t wait too long.

“This recent two year low for mortgage rates is only further evidence that now is an excellent time to buy a home for many Americans, especially when looking at the historical averages,” Parker told ConsumerAffairs. “In the early 2000s, before the Great Recession, mortgage rates were in the five and six percent range. Today, they're under four. These record lows will bring more buyers to the market this summer, making already competitive markets even hotter.”

Data from realtor.com show nearly three-quarters of the 100 largest U.S. metros -- including some of the most expensive -- are more affordable than at this time last year, even though home prices have continued to rise.

Falling mortgage rates have helped. So have slightly larger paychecks in recent months. Another big advantage is the growing number of homes for sale, reversing years of declining inventories that created a demand/supply imbalance.

According to realtor.com, the median home listing price in May was $315,000, a 6 percent increase and a new record high. Home inventories grew by 3 percent last month with the typical home spending 53 days on the market before going under contract.

“Flipping” houses wasn’t quite as common or as profitable in the first three months of the year, according to ATTOM Data Solutions, which monitors real estate transactions.

The company reports 49,059 single family homes and condos were flipped in the first quarter of 2019, down 2 percent from the previous quarter and 8 percent lower than a year ago, marking a three-year low.

A flip is defined as buying and selling a property within a 12 month period. The real estate market crash of 2009, and the wave of foreclosures it created, led investors to purchase  distressed properties, make some renovations, and put them on the market.

It was a highly profitable enterprise for professionals and amateurs alike, but ATTOM Data Solutions reports it is getting less profitable since there are fewer distressed properties and those that do exist require a greater investment to get them ready to sell. Now that the housing market is softening, it isn’t getting any easier.

$60,000 average gross profit

Flips made up 7.2 percent of all home sales from January through March and the average gross profit was $60,000, providing a return on investment (ROI) of about 39 percent. That’s down from $68,000 in the first quarter of 2018, when flippers achieved a nearly 49 percent return on investment.

Popularized by cable TV series like “Flip This House,” buying a home to resell is no longer the guaranteed profit it once was.

"With interest rates dropping and home price increases starting to ease, investors may be getting out while the getting is good, before the market softens further," said Todd Teta, chief product officer at ATTOM Data Solutions. "Gross profits and ROI are starting to weaken and the number of investors that are flipping is down 11 percent from last year.”

Deep pockets

Home flippers also need deep pockets. Most borrow the money to purchase the property and therefore have a monthly mortgage until they sell it. They also have property taxes and insurance costs, and insurance on an investment property tends to be higher than a typical homeowner’s policy.

Despite that, some housing markets are seeing a surge in home flippers. More than half of markets analyzed in the report showed an increase in activity, led by Columbus, Ga., where home flipping increased 83 percent. Flips were 73 percent higher in Raleigh, N.C., and were up 65 percent in Charlotte.

Home flippers served a useful purpose as the housing market recovered over the last decade and a shortage of available homes drove up prices. In most cases, flipped homes were improved and repairs were made so that the houses could be put back on the market, adding homes to an otherwise tight inventory.

American Honda Motor Co., is recalling 118,598 model year 2019 CR-Vs.

The metal core of the steering wheel may have burrs which can damage the harnesses routed within, potentially disabling the driver's air bag or causing it to deploy without warning.

In the event of a crash, a disabled air bag would increase the risk of injury. An uncommanded deployment of the driver's air bag also increases the risk of injury and a crash.

What to do

Honda will notify owners, and dealers will install a protective cover on the steering wheel core and replace clockspring and the harnesses within free of charge.

The recall is expected to begin July 8, 2019.

Owners may contact Honda customer service at 1-888-234-2138. Honda's number for this recall is R4S.

The spring homebuying season remains tepid as sales of existing homes fell again in April, following March’s decline.

The National Association of Realtors (NAR) reports April sales were 0.4 percent lower than March. March existing home sales were down 4.9 percent from February, as buyers showed a preference for new homes.

Home sellers expecting the spring homebuying season to pick up have been disappointed so far. But Lawrence Yun, NAR’s chief economist, says economic factors are still working in both buyers’ and sellers’ favor.

"First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions," Yun said. "Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales."

Freddie Mac reports the average commitment rate for a 30-year, conventional, fixed-rate mortgage dipped to 4.14 percent in April from 4.27 percent in March. The average commitment rate for all of 2018 was 4.54 percent.

Home prices still going up

The slowdown in home sales that began in mid-2018 has also coincided with monthly home price increases that are beginning to put some entry-level homes out of reach for many first-time buyers. In April, the median price of all types of existing homes was $267,300, up 3.6 percent from April 2018. The median home price has now increased for 86 straight months.

Housing experts say housing inventory has been a big driver of prices ever since the pool of available homes began to decline sharply following a pick-up in sales five years ago. Lately, that trend has reversed, with inventory at the end of April increasing to 1.83 million from 1.67 million in March.

Unsold inventory is at a 4.2-month supply at the current sales pace, up from 3.8 months in March and up from 4.0 months in April 2018. Housing economists suggest a six month supply is ideal to maintain a balanced housing market.

More choices

"We see that the inventory totals have steadily improved, and will provide more choices for those looking to buy a home," Yun said.

Even so, sellers appear to be in a strong position despite the slowdown in home sales. Not only are prices still rising in most markets, but homes are selling more quickly. In April, properties stayed on the market for an average of 24 days before getting a contract, 12 fewer days than the month before.

But Yun cautions homeowners who plan to sell not to overplay their hand. He says being realistic about current market conditions and pricing the property accordingly will help homes sell at a faster pace.

A new housing market report contains a troubling statistic, showing the number of seriously underwater U.S. homeowners -- those owing more than their home is worth -- moved higher in the first quarter.

The increase was not insignificant. ATTOM Data Solutions reports that more than 5.2 million homes were seriously underwater at the end of the first quarter. That’s defined as homes where the loans secured by the property were at least 25 percent more than the home’s value.

At the end of the first quarter, 17,000 more homes fell into that category than at the end of the first quarter of 2018. That represents 9.1 percent of all properties with a mortgage, up from 8.8 percent at the end of the previous quarter.

Todd Teta, chief product officer at ATTOM Data Solutions, says home prices are rising at a slower pace, which may have contributed to the increase. And while it’s a trend to watch, he says it’s not quite a red flag.

“Only one in 11 mortgages are seriously underwater today, compared to nearly one in three during the depths of the recession,” he said. Although, if the latest trend continues, it will raise another clear signal of a market slowdown, which will be good for buyers, but not so good for sellers.”

2009 housing crash

The Great Recession, made worse by a worldwide financial crisis, hit homeowners especially hard. Home values plunged, meaning underwater homeowners couldn’t sell or refinance, and many lost their homes to foreclosure.

No one is predicting that will happen again. Many of the excesses of the housing bubble have been eliminated, and homebuilders are not adding to housing inventory the way they were during the bubble years.

“If the pattern of the past few years takes hold – with levels of underwater and equity rich mortgages turning around - it will mean the market remains strong for sellers, with fewer needing to get out from under financial distress," Teta said.

Homeowner distress is largely a product of geography, with the most cases clustered in a handful of states.

Concentrated in the south

Louisiana has the highest percentage of underwater homeowners,  at 20.7 percent. Mississippi is next at 17.1 percent, followed by Arkansas with 16.3 percent, and West Virginia and Illinois both with 16.2 percent.

Drilling down to metro areas in the U.S., Baton Rouge, La., has the highest percentage of underwater homes, followed by Scranton, Pa.; Youngstown, Ohio; Toledo, Ohio; and New Orleans.

States with the largest percentage of homes where homeowner equity has increased are California, Hawaii, New York, Washington, and Vermont.

After a slow start, the spring homebuying season is gaining momentum -- and so are home prices.

The National Association of Realtors (NAR) reports pending home sales rose 3.8 percent in March from February. Pending home sales measure contracts that were signed but not yet closed.

At the same time, the S&P CoreLogic Case-Shiller Indices showed home prices increased year-over-year in February, but the rate of increase continues to slow down.

The spring homebuying season is off to a rather slow start and higher home prices may be one reason. Last week, NAR reported that sales of existing homes in March plunged 4.9 percent from the month before and were down 5.4 percent from March 2018.

Rising rates and prices

Sales have fallen sharply in the last two years as mortgage rates have risen and the prices of homes have continued to go up, making for higher monthly payments for buyers. The pending home sales report suggests that could be turning around.

"We are seeing a positive sentiment from consumers about home buying, as mortgage applications have been steadily increasing and mortgage rates are extremely favorable,” said Lawrence Yun, NAR’s chief economist.

The increase in pending home sales could lead to an increase in final home sales for April and May, as those signed contracts make their way toward closing.

Meanwhile, the prices buyers are paying for homes continue to rise. The Case-Shiller report showed a 4.0 percent year-over-year rise in home prices, However, that was down 4.2 percent from the previous month.

Where prices are rising the fastest

Home prices rose the most in Las Vegas, Phoenix, and Tampa out of 20 markets in the survey. Las Vegas led the way with a 9.7 percent year-over-year price increase, followed by Phoenix with a 6.7 percent increase and Tampa with a 5.4 percent increase.

While rising home prices can make things difficult for first-time buyers, David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, says the latest report contains an element of encouraging news.

"The pace of increases for home prices continues to slow," Blitzer said. "Homes began their climb in 2012 and accelerated until late 2013 when annual increases reached double digits. Subsequently, increases slowed until now when the National Index is up 4 percent in the last 12 months.”

Competition for existing homes appears to be tapering off in some markets, while mortgage rates are down one-half to three-quarters of a percentage point since late 2018.

For some, the foreclosure crisis of a decade ago is only a distant, unpleasant memory. But an analysis from Zillow suggests it remains a troubling reality for some minority homeowners.

Home prices now exceed their housing bubble highs in most parts of the country, but home values have been much slower to recover in neighborhoods that suffered massive foreclosures.

In predominantly black and Hispanic neighborhoods, home values plunged as much as 50 percent before the market began to recover. Foreclosed homes in black and Hispanic communities have more than doubled in value since then. Even so, they remain as much as 9.5 percent below their peaks.

Loss of wealth

Many minority homeowners, who had been saddled with subprime mortgages during the housing bubble, lost their homes to foreclosure when the market plunged and their interest rates skyrocketed. Even those who managed to hang onto their homes haven’t always benefited from the housing recovery.

"The housing bust and foreclosure crisis that followed resulted in a disproportionate number of people of color losing not only the roof over their heads but the wealth -- and the opportunity to potentially build more -- that came with it," said Zillow Senior Economist Sarah Mikhitarian.

Mikhitarian says black and Hispanic homeowners were hit hard financially by the foreclosure crisis because their homes made up a large share of their net worth. With fewer liquid assets at their disposal, they often had no choice but to let their homes go when they fell underwater.

“For people who ultimately succumbed to foreclosure, they missed out on the opportunity to see their home's equity -- and therefore their wealth -- climb back up," Mikhitarian said.

In 2007, when home values had inflated the bubble to the breaking point, a home accounted for 73.1 percent of a typical Hispanic consumer’s net worth. It made up 61.8 percent of the typical black homeowner’s total wealth. When the housing market crashed, that wealth crashed with it.

In black communities, foreclosures hit 36.3 percent in Philadelphia, 38 percent in St. Louis and Baltimore, 40 percent in Cleveland, and 50 percent in Atlanta. Not surprisingly, these housing markets have lagged behind the rest of the nation in housing market recovery.

In Hispanic communities, foreclosures reached nearly 60 percent in the Los Angeles market and 55 percent in San Antonio.

Conventional real estate marketing wisdom holds that the best way to sell a house and get it in “move-in condition” is to fix everything that needs repair and apply a fresh coat of paint.

But a new survey from real estate marketplace realtor.com has turned that notion on its ear. It found that 60 percent of consumers who plan to shop for a house this spring want one that needs some work.

It’s not that today’s buyers are eager to roll up their sleeves and do some manual labor. The survey finds that today’s shoppers are hoping to save money by selecting a house that needs some TLC. Too many homes in “move-in condition” are now out of their price range.

"The combination of rising home prices and limited entry-level homes for sale is prompting many home shoppers to consider homes that need renovating," said Danielle Hale, realtor.com's chief economist.

Influence of Pinterest and HGTV

Hale says today’s younger shoppers are also more confident they are up to the task of a home renovation project after reading tips on Pinterest and watching various shows on HGTV.

The survey found that nearly three out of five home shoppers under 55 years-old are considering a home this spring that needs renovating. Consumers 35-54 years-old are the most likely to take on a fixer-upper. Hale says this group is most likely to already own a home and have experience with some home maintenance chores.

In the wake of the housing crash, many people purchased distressed properties, but in most cases they were investors hoping to flip the homes for a profit or convert them to rental properties. But with today’s high home prices, it appears the majority of people looking at homes in need of renovating plan to live in them.

Median home price now at $300K

Earlier this month, realtor.com reported that the median price of a home in the U.S. reached $300,000 for the first time ever -- a price point far beyond what many can afford.

"Heading into spring, U.S. prices are expected to continue to rise and inventory is expected to continue to increase, but at a slower pace than we've seen the last few months as fewer sellers want to contend with this year's more challenging conditions,” Hale said. “A buyer's experience will vary notably depending on the market and price point they're targeting."

For home sellers, this trend might work in their favor, especially if the home needs repairs. If the realtor.com survey is to be believed, then there is a growing segment of buyers that may find your house attractive if you do nothing to it.

Just keep in mind, they may find it attractive because they believe they can get it for a lower price. As long as you’re willing to deal, your fixer-upper may sell faster than you think.

A picture may be worth a thousand words, but using the right words in a home listing might help sell it for more money. At least, real estate marketplace Zillow says that’s the case.

The words have to do with a home’s features, particularly what’s in the kitchen. If you have things that buyers want, mentioning them prominently in the home description will increase traffic and the price a buyer is willing to pay.

34 percent more

In their Home Features That Sell analysis, Zillow researchers found that descriptions that mention “steam oven” or “professional appliance” sold for up to 34 percent more than expected. The data revealed that six out of the top ten features in homes that attracted buyers and brought more money were entertainer-friendly kitchen amenities.  

To reach those conclusions, Zillow looked at listing descriptions from 4.6 million home sales around the country that were posted on its site in the two previous years. The analysis identified the features and design styles that made a house sell for more, compared to others in the neighborhood.

The analysis also pinpointed the markets where that feature was most commonly mentioned in for-sale listing descriptions. Of all the trendy kitchen features, mentioning a home had a steam oven appeared to be the most powerful.

However, it didn’t make a home sell faster. Homes mentioning steam overs, which is a wall oven that steams food, stayed on the market 22 days longer than average. But when the house sold, it sold for above the market average.

Skylar Olsen, director of economic research at Zillow, says having the amenity and mentioning it may be a trigger for buyers.

"Having a steam oven, a heated floor or other luxury features in the home is a signal that there are more than the home's basic features at play,” Olsen said. “These homes are special. They likely come with an elevated design sense and the extra touches valued by home shoppers who are willing to pay."

Mention the amenities

Olsen says sellers who have homes with these features should not be shy about flaunting them.

Most starter homes don’t have these kinds of luxury amenities, but the Zillow researchers found that upgraded features are always worth mentioning to attract these mostly millennial buyers.

The analysis found starter home listings mentioning “free-standing tub,” “pizza oven,” or “wine cellar” brought a bigger sale price than expected. The researchers say this likely reflects the lifestyle millennial homeowners want to live.

That’s not to suggest that you should invest in adding these amenities to your home in hopes of selling at a higher price, only mention them if you have them. If you are considering renovations and updates to an older home, ConsumerAffairs has compiled this handy guide with some suggestions.

April kicks off the spring home-buying season, and this year, for the first time in a long time, there’s good news for first-time buyers.

There are more entry-level homes for sale and they aren’t rising as quickly in price. The median price of an entry-level home -- one valued in the bottom third of the overall housing stock -- is growing at the slowest rate since mid-2016, according to research by RealEstate.com.

The report also shows the inventory of entry-level homes, which has shrunk in recent years, is growing once again, meaning buyers have more choices and less competition.

That’s the good news. The bad news is that the price of the typical entry-level home is a lot higher than it was a few years ago. The RealEstate.com report shows the average entry-level home is now valued at $130,200, up 9.2 percent from a year ago. Believe it or not, that’s the slowest rate of annual appreciation on record since June 2016.

Homes not likely to get cheaper

A year ago, the average entry-level home price was growing at a rate of 12.5 percent. Absent a catastrophic economic event, such as the 2008 financial crisis, home prices aren’t likely to go down. But if prices level off and incomes keep rising, first-time buyers may have a better opportunity to become homeowners.