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A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association’s (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.
The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department’s Bureau of Economic Analysis revealed on Thursday.
Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred measurement of inflation’s progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.
These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed’s hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.
The Fed’s funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.
But an economy that may avoid a recession as inflation moderates without the Fed’s tight monetary policy doing too much damage to the jobs market would help the housing sector.
“Stronger economic growth will benefit the housing market, keeping demand robust,” Mike Fratantoni, MBA’s chief economist, said in a statement shared with Newsweek. “Moreover, today’s report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting.”
Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.
“The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.
“Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” he said.
A slowdown in rates could have a negative impact on home buyers, some analysts say.
A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.
More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.
The investment bank’s experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.
Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.
“We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation,” Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.
On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.
“Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates,” she said in a note shared with Newsweek.
But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months’ worth of supply.
This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.
The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.
This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.
“If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap,” Maleyev said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
“The best news is for buyers who will see more options to choose from, increased negotiating power and reduced time pressure.”
For most of 2023, the housing market was stuck in neutral. Rising mortgage rates weighed on both supply and demand, causing home sales to plummet.
And for a while, it seemed like mortgage rates could climb indefinitely. But mortgage rates started to reverse course in November, and suddenly, the outlook for the 2024 housing market was striking a more positive tone.
While lower mortgage rates won’t entirely crack the ceiling of what’s still a historically unaffordable housing market, 2024 is expected to be more balanced, with the potential for higher inventory and slightly lower home prices, according to Fran Lisner, real estate agent with Daniel Gale Sotheby’s. “The best news is for buyers who will see more options to choose from, increased negotiating power and reduced time pressure,” Lisner said.
As we kick off the year, prospective homebuyers are wondering what’s in store for them. We talked to several experts about their housing market predictions and top tips for today’s homebuyers. Here’s what they had to say.
Read more: Mortgage Predictions: Could 2024 Be a Better Year for Homebuyers?
While experts are cautiously optimistic about the direction of the housing market in 2024, buying a home (especially if it’s your first time) is rarely a pain-free process. From tracking market conditions to the actual process of getting a mortgage, there are a lot of moving parts.
Housing market trends are dynamic and, oftentimes, hard to understand, especially when it comes to all the factors that affect mortgage rates (the list is longer than you think).
That’s why housing market experts and economists are constantly tracking economic data to better understand where things are headed. Keeping an eye on what those experts are saying, whether by reading newsletters or listening to podcasts, can help you become a more informed buyer without getting too deep into the macroeconomic weeds.
Here are some of the podcasts I listen to that help me stay in the loop.
In 2023, mortgage rates kept climbing until they passed 8% in early fall. But soon after, rates started to trend down for the first time in months. As inflation slows and the Federal Reserve initiates interest rate cuts, experts predict mortgage rates will eventually reach 6% by the end of 2024.
“Rates are down over 1% since peaking in October, and with the Fed done with their rate hikes, we expect rates to keep falling for the next few months at least,” said Greg Heym, chief economist at Brown Harris Stevens.
But mortgage interest rates are volatile, making them difficult to predict. And while tracking mortgage rate movement isn’t the most exciting thing to do, there’s a reason experts recommend it: It can save you a lot of money and free up some room in your homebuying budget.
Your interest rate doesn’t only affect your monthly mortgage payments. It also affects the total interest you’ll pay over the course of your loan. Securing a lower rate from the beginning, even if by a few tenths of a percentage point, can save you tens of thousands of dollars over time.
Read more: Compare Current Mortgage Rates
If you haven’t already, start budgeting for your down payment and other costs associated with a home purchase, like closing costs.
The minimum down payment required by most lenders is 3% for conventional loans. But experts often recommend making a down payment closer to 20% of the property’s asking price. That way, you can take out a smaller loan and avoid having to pay private mortgage insurance.
Many lenders will approve you for a loan larger than what you need or can comfortably afford. But that means taking on more debt. “Shift from asking, ‘How much could I borrow?’ to ‘How much should I borrow?’” said Matt Vernon, head of consumer lending at Bank of America.
When creating a budget, you want to make sure you can cover your future monthly mortgage payments as well as any other debt you have, like student loans or credit card debt. At CNET, we recommend the 28/36 rule: Allocate no more than 28% of your pre-tax monthly income toward housing-related expenses and keep your total monthly household debt below 36% of your gross income.
CNET’s mortgage calculator can give you a good idea of what your future mortgage payments might look like based on a few specifics, like your credit score, projected down payment and interest rate.
Read more: How Much House Can I Afford?
Between 2020 and 2022, home prices saw double-digit growth. In 2023, the pace of growth slowed but prices were still up around 3% on an annual basis. Forecasts from Redfin and Realtor.com show home prices easing in the second half of 2024, but not dramatically — between 1% and 1.7%.
“I don’t predict many bargains out there because you don’t go from zero inventory to an overflow of available homes on the market, which is when you would see a substantial price drop,” said Dottie Herman, vice-chair at Douglas Elliman Real Estate. That means we won’t see any major home price declines in 2024, according to Herman.
But what real estate is doing on a national level might not reflect what’s happening in your neck of the woods. Home prices and housing supply vary by city and state, so it’s always worth looking at less expensive markets. In markets where inventory is especially tight, like New York, prices are expected to increase by 3% in 2024. Meanwhile, prices in the Austin, Texas, metro area are projected to fall by around 12%.
Many prospective buyers are sitting on the sidelines as they wait for mortgage rates to fall and affordability to improve. As mortgage rates inch lower over the course of 2024, experts expect that pent-up homebuying demand will lead to increased competition.
“If 2024 becomes a turnaround year for housing, my suggestion would be to get all of your financing straightened out and in shape, and then start looking right away before the weather changes and you are joined by competition,” said Herman. “That’s when bidding wars start, so you want to be ahead of them.”
Buying sooner rather than later, if you have the option, could grant you more negotiating power while the pace of home sales is still slow, according to Afifa Saburi, capital markets analyst at Veterans United Home Loans.
Limited housing inventory is directly related to the lack of home sales: Because the majority of current homeowners have mortgage rates below 5%, they haven’t been eager to list their homes and give up their bargain interest rates for today’s higher rates.
While experts are split on how much the inventory of existing homes will increase in 2024, there is a silver lining: New construction. “Single-family construction has offered relief from scarce existing inventory conditions over the last year,” said Hannah Jones, senior economic research analyst at Realtor.com.
If supply is limited in your area, consider what new-home construction is (or will be) available this year. Buying a newly constructed home comes with a few benefits. For starters, a new home will be move-in ready and likely more energy-efficient than an older home.
Brand-new homes can often be more affordable. As a way to incentivize buyers, many home builders have been offering discounts and rate-buydowns — when you (or a seller) pay money upfront to a lender in exchange for a lower interest rate. Experts say those incentives will continue into 2024.
The right real estate agent can make a big difference in your homebuying journey. You want someone with good communication skills, connections and experience, but the most important thing is an agent with in-depth knowledge of your market who can help you develop the right approach, said Joseph Castillo of Compass Real Estate.
An agent familiar with your area can tell you how realistic your budget is or even point you to more affordable neighboring areas. Start by contacting several local real estate agents to discuss your needs and concerns before settling on one.
If cost continues to be a barrier, see if you qualify for government-backed loans or down payment assistance programs.
“While increased demand is pushing up home prices, there are loan options and grant programs for those who may be able to afford monthly mortgage payments but struggle with the upfront costs,” said Vernon.
FHA loans, VA loans and USDA loans tend to offer lower credit score and down payment requirements than conventional loans. States also provide different types of housing assistance, either through grants or interest-free loans. Check with your state or local housing authority, real estate agent or lender to find out what you may qualify for.
Read more: These 8 First-Time Homebuyer Programs Can Save You Money on Your Mortgage
No matter what’s happening in the market, one step you should never skip is shopping around for mortgage lenders. Researching and comparing offers from multiple lenders will help you find someone aligned with your financial picture and save you a lot of money on your mortgage.
Mortgage interest rates and fees vary widely across lenders. That’s why experts recommend getting at least three loan estimate forms from different lenders to compare the cost of borrowing and potentially negotiate a lower mortgage rate or better loan terms.
If 2024 isn’t your year to buy a home, that’s OK. You can do plenty of things while you wait to put yourself in a better position when you’re ready to buy.
Improve your credit score. Your credit score is one of the main factors lenders consider when determining whether you qualify for a mortgage and at what interest rate. The minimum credit score for conventional loans is 620, but to qualify for the lowest rates, you’ll want to aim for closer to 740. Paying your credit cards on time (ideally, in full) and staying below your credit limit are great places to start.
Pay down debt. Lenders also take into account your debt-to-income ratio, or DTI. Paying down debt will lower your DTI, which means you’ll be able to borrow more — and at a better rate. As an added (and significant) bonus, it will also relieve a major financial burden and give you more room to save for long-term goals, like your down payment.
Save for a down payment. It can take a long time to save up enough cash for a down payment, but you can start small with weekly or monthly savings goals. Consider stowing your cash in a high-yield savings account or certificate of deposit (if you don’t plan to buy in the immediate future) to take advantage of compounding interest.
Experts are optimistic that a combination of falling mortgage rates and slightly lower home prices will give homebuyers more options than last year. But a variety of other issues — like low inventory — are weighing on affordability. Ideally, the affordability crisis will ease and the housing market will stabilize, but that is unlikely to happen in just one year. Though 2024 might not seem like the best year to buy a house, the perfect time should be determined by your financial circumstances and long-term goals.
“Buyers often ask me if it’s the right time to make a purchase. It is, but only if you’re prepared,” said Castillo.
Source: cnet.com
In this article, we will take a look at the 20 best states for construction jobs in the US. If you want to skip our discussion on the construction industry, you can go directly to the 5 Best States for Construction Jobs in the US.
The construction sector serves as a significant indicator of economic activity, providing valuable insights into the overall health of an economy. Despite encountering challenges such as rising material costs and supply chain disruptions, the residential construction sector is experiencing a positive turn in 2023. According to Global Data, the size of the US construction market was $2.1 trillion in 2022. The report predicts a steady average annual growth rate of at least 4% for the next four years. The primary sectors within the US construction market include residential, commercial, industrial, institutional, infrastructure, energy, and utilities construction.
Homebuilder companies’ stocks are rising as investors anticipate Fed rate cuts. Earlier this month, the Federal Reserve indicated plans for three rate cuts in 2024. Furthermore, last week, mortgage rates dropped below 7% for the first time since August, which renewed momentum in the housing market. Popular builder stocks like Lennar Corp. (NYSE:LEN) and DR Horton (NYSE:DHI) have shown over 60% growth in 2023, while PulteGroup (NYSE:PHM) has risen by over 120%. You can check out the 13 Most Profitable Real Estate Stocks here. The positive shift in market sentiment is credited to the increasing demand for new homes, driven by buyer preferences and mortgage rate reductions that make new homes more appealing compared to used homes. This growth in demand is further supported by employment data. Unemployment in the construction sector, which reached its peak at 16.6% in March 2020, decreased to 4.8% in November 2023 after reaching 6.9% in January 2023.
Here’s what Baron Funds said about Lennar Corp. (NYSE:LEN) in its Q2 2023 investor letter:
“Our investments in homebuilder companies – Toll Brothers, Inc., Lennar Corporation (NYSE:LEN), and D.R. Horton, Inc. – performed well in the first six months of 2023. The share price of Toll Brothers increased nearly 60% and the shares prices of Lennar and D.R. Horton each gained more than 35%.
Year-to-date, each company has witnessed a meaningful uptick in demand to buy homes:
Home buyers continue to come off the sidelines and buy homes despite 30-year mortgage rates remaining in the 6.5% to 7.0% range. Several factors are contributing to the recent strength, including pent-up demand to buy homes and fears that mortgage rates could move higher. • The sticker shock of rapidly rising mortgage rates appears to have cooled down. Homebuilders have made homes more affordable to prospective home purchasers by offering mortgage rate buydowns to the mid-5% mortgage rate range while maintaining strong profitability margins. • A dearth of inventory in the existing home market and an overall housing supply shortage is driving home buyers to “stretch their wallet” due to fears that they could miss the opportunity to buy a home.
We remain optimistic about the long-term potential for the Fund’s investments in Toll Brothers, Lennar, and D.R. Horton for several reasons…” (Click here to read the full text)
According to the US Bureau of Labor Statistics, Wyoming, North Dakota, and Montana are identified as the best states for construction jobs on the basis of location quotient. The location quotient is a metric employed by the Bureau of Labor Statistics (BLS) to assess the level of concentration of a specific industry within a particular state in comparison to the entire nation. The industry’s overall outlook is optimistic, and the construction sector is predicted to experience significant growth throughout 2024. With this context in mind, let’s see which state has the most construction work 2023.
Aerial view of a construction site for a single family detached home.
Our Methodology
To identify the 20 best states for construction jobs in the US, we referred to the US Bureau of Labor Statistics for the latest state-specific data on location quotient and average annual salary. Location quotients are ratios that provide insights into an area’s employment distribution by industry. A location quotient higher than 1 signifies that an industry holds a larger share of local area employment compared to the national average. The 20 best states for construction jobs in the US have been ranked in ascending order of their location quotients.
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Location Quotient: 1.14
Average Salary: $49,760
Texas ranks 3rd in the US in terms of population growth rate as of 2023. The average annual salary for construction workers in the state stands at $49,790. Texas emerged as one of the leading states in the construction industry, adding over 21,000 jobs in 2023.
Location Quotient: 1.16
Average Salary: $51,250
In 2023, the total construction value in Nebraska’s economy amounted to $3.91 billion, with a corresponding Gross State Product (GSP) of $126 billion. The average annual salary for a construction worker in Nebraska stands at $51,250.
Location Quotient: 1.16
Average Salary: $52,470
In 2023, the total construction value in Arizona reached $13.94 billion, while GSP stood at $136.2 billion. Despite the challenges in construction growth, Arizona maintained a 5-year average annual employment growth rate of 2%. Real estate and rental and leasing are amongst the top employment segments for the state.
Location Quotient: 1.17
Average Salary: $52,062
The total construction value in Vermont amounted to $893.91 million in 2023, experiencing an annual growth of 1.3%. The GSP for the same year reached $30.2 billion. However, Vermont faced a challenge in employment growth, with a 5-year average annual rate of -1%.
Location Quotient: 1.19
Average Salary: $49,820
The GSP of Oklahoma for 2023 was $195.2 billion, while the value of total construction was $4.4 billion. This was a decrease of 6.4% on an annual basis, while the five-year annualized decline was 4.5%.
Location Quotient: 1.19
Average Salary: $77,850
The contribution of total construction to Hawaii amounted to $2.64 billion. The five-year annualized growth for construction experienced a decline, contracting by 7.5%. Despite these challenges, Hawaii’s GSP remained at $76.5 billion.
Location Quotient: 1.22
Average Salary: $73,140
With a GSP of $577.2 billion, the value of the construction sector in the state was $21.28 billion in 2023. The five-year annual growth rate for the construction sector in the state was 3.7%. Meanwhile, the average annual employment growth rate for the state was 1%.
Location Quotient: 1.24
Average Salary: $57,430
The contribution of the construction sector to Colorado’s economy was $17.41 billion, while the total GSP was $371.3 billion in 2023. This was an increase of 0.9% year on year. Over the past five years, the average annual employment growth rate in the state was 1.4%.
Location Quotient: 1.26
Average Salary: $52,350
Maine is at the twelfth position on our list of the 20 best states for construction jobs in the US. The average annual salary for a construction worker in the state is $52,350. Maine’s GSP in 2023 was recorded at $65.5 billion.
Location Quotient: 1.33
Average Salary: $47,170
In 2023, South Dakota’s GSP amounted to $50.5 billion. The construction sector contributed $1.43 billion to the GSP, experiencing a negative growth rate of -3.1% for the year. Over the past five years, South Dakota had an average annual employment growth of 1.0%.
Location Quotient: 1.34
Average Salary: $61,570
Nevada is among the top 10 best states for construction jobs in the US. The value of total construction in Nevada was $9.08 billion during 2023, with an annualized 5-year growth rate of 0.4%. The GSP for the same period was $170.1 billion.
Location Quotient: 1.43
Average Salary: $50,350
Louisiana’s GSP was recorded at $219.1 billion for 2023. The construction sector contributed $7.08 billion to the GSP. The state experienced a five-year average annual employment growth of -0.4%.
Location Quotient: 1.47
Average Salary: $52,740
The GSP of West Virginia for 2023 was recorded at $71.7 billion, with an annualized 5-year growth rate of 0.1%. The contribution of the construction sector to the GSP was $2.28 billion. The state experienced a five-year average annual employment growth of -0.4%. The major employment sectors in West Virginia include mining, healthcare and social assistance, and manufacturing.
Location Quotient: 1.48
Average Salary: $49,620
Idaho is amongst the fastest-growing US states in terms of population. Idaho’s gross state product for 2023 was $85.7 billion, with an annualized 5-year growth rate of 15.3%. The contribution of the construction sector to the GSP was $3.71 billion in 2023. The five-year growth rate for the construction sector in the state is 4.1%.
Location Quotient: 1.52
Average Salary: $52,380
Utah is the fastest-growing US state in terms of GSP and the second in terms of population growth. Its GSP for 2023 was $185.2 billion, with an annualized 5-year growth rate of 3.7%. The contribution of the construction sector to the GSP was $11.83 billion during 2023. Over the five-year period, the construction sector achieved a growth rate of 5.9%.
Lennar Corp. (NYSE:LEN), DR Horton (NYSE:DHI), and PulteGroup (NYSE:PHM) are some of the popular builder stocks contributing to the growth of the construction industry.
Click to continue reading and see the 5 Best States for Construction Jobs in the US.
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Disclosure: None. 20 Best States for Construction Jobs in the US is originally published on Insider Monkey.
Source: finance.yahoo.com
Rising home prices have pushed the third quarter’s tappable home equity amount near its 2022 peak, but interest rates are making homeowners reluctant to extract that wealth.
Mortgage holders withdrew a mere 0.41% of tappable equity in Q3, about 55% below the average withdrawal rate seen in the 12 years leading up to the Federal Reserve’s most recent tightening cycle, according to the latest ICE Mortgage Technology‘s mortgage monitor report.
“Indeed, in recent quarters, equity withdrawal rates have been running at less than half their long-run averages. That’s equivalent to $54 billion – $250 billion over the last 18 months – in ‘missing’ withdrawals that might have otherwise stimulated the broader economy,” said Andy Walden, vice president of enterprise research at ICE Mortgage Technology.
Rising equity levels are also contributing to low default and foreclosure activity.
Foreclosures starts rose to 33,000 in October – the highest level in 18 months – but still remained 35% below COVID-19 pandemic norms. Loans in active foreclosure inched up to 217,000, but remained more than 25% below pre-pandemic levels.
About 70% of loans currently three or more payments past due are protected from foreclosure by ongoing loss mitigation efforts. In addition, about 58% of these seriously delinquent mortgage holders hold more than 20% equity stakes in their homes.
“Strong equity cushions not only provide borrowers incentive to work with their servicers to return to making mortgage payments, they also open up other options, such as salvaging earned equity with a traditional home sale rather than going through foreclosure. The more the industry can do to educate, and update, borrowers as to their equity positions, the better,” Walden said.
Mortgage originations
Purchase lending dominated the market overall, driving 86% of all first-lien lending in the third quarter. In 2024, roughly 75% of originations expected to come from purchase loans.
Despite compressed volumes, cash-out refinance loans fueled what is left of the refinance market accounting for 92% of the third quarter activity. Borrowers withdrew a record $104,000 on average.
Rising mortgage rates continued to put pressure on homebuyers, with the average debt-to-income (DTI) ratio on purchase loans hitting 40.5% in October, a series high dating back to January 2018.
The average DTI among conventional mortgages reached 37.8% in October, also a series high, while the average among FHA and VA loans hit 45.5% and 44.4%, respectively. These figures are both up sharply from recent months, but slightly below last year’s high of 45.7% for FHA loans and 44.5% for VA loans.
Lenders have responded by tightening credit requirements and the average credit score among conventional, FHA and VA loans.
Average credit scores for FHA loans rose 14 points in October over the past 12 months while VA loans climbed 13 points.
Source: housingwire.com
After exceeding 8 percent in October, rising mortgage rates overtook “lack of housing inventory” as the top concern for real estate agents, according to the results of the latest monthly Inman Intel Index.
Approximately one-third of agents and the brokerage executives who lead them believe high mortgage rates are the biggest for concern in the housing market today, surpassing low inventory and fallout from commission lawsuits such as Sitzer | Burnett, according to the results of October’s Inman Intel Index survey, released last week.
After exceeding 8 percent in October, rising mortgage rates overtook “lack of housing inventory” as agents’ top fear after ranking second in the same survey a month earlier. The findings are among hundreds gleaned from the Inman Intel Index, or Triple I, which was conducted Oct. 23-31 and drew 1,269 responses. The 168-page report is available exclusively to Inman Intel subscribers and includes a comprehensive breakdown of all survey responses.
This month’s Inman Intel Index survey is open now.
“I think that homebuyers and real estate agents understand well that the 3 percent mortgage rate is a historic abnormality and is not the norm,” Gay Cororaton, chief economist for the Miami Association of Realtors, told Inman by email. “But the current rate of 8 percent is also not normal, and I expect rates to go further down in 2024.”
Mortgage rates have fallen significantly in November, with the average 30-year fixed mortgage closer to 7 percent than it has been in two months. For homebuyers and sellers, the benefit is clear, but after more than a year of rates in excess of 6 percent, the decline in rates is also a huge morale booster for real estate professionals, according to the survey results.
Only one group surveyed in the Triple-I didn’t rank interest rates as their top business concern in October. Mortgage originators, who did rank them first in September, put them second behind lack of home inventory. With refinance activity down severely, it stands to reason that brokers and bankers are focused on homes coming on the market.
To track industry sentiment, the Triple-I polls real estate agents, loan originators, brokers, industry executives and proptech leaders monthly. November’s survey opened today and can be accessed here.
No one gets a bite at the apple, though, until someone decides to buy a home, and elevated interest rates continue to factor heavily into the homebuying equation for many Americans. A new consumer survey undertaken by Inman, in partnership with Dig Insights, surveyed 3,000 potential homebuyers and found that many need to see a far more dramatic rate drop to move forward.
More than 2 out of 3 Americans surveyed by Dig Insights indicated they were unlikely to buy in the next 12 months, and 35 percent of those said that high interest rates were a factor in their decision. Asked how much mortgage rates would need to decrease for them to become likely to buy, one-third chose “More than 2 percent.”
According to an Inman Intel analysis last month, a mortgage payment that would have been close to $1,175 four years ago now comes to over $2,600 a month. That’s a problem for a lot of homebuyers, first-timers or not.
“With mortgage rates still expected to be elevated at over 5 percent, there’s naturally a higher financial hurdle for existing homeowners to move,” wrote Cororaton, a former senior economist and the director of housing and commercial research at the Research Group of the National Association of Realtors.
With a potential ceiling on rates, real estate agents and loan originators are looking toward 2024 with cautious optimism. While nearly 70 percent of agents indicated their buyer pipeline was either lighter or substantially lighter than it was 12 months ago, less than 30 percent felt that would be the case one year from now. Over one-quarter of them responded “Heavier,” while just under 44 percent said they expected it to be about the same.
Mortgage originators were even more optimistic, with over 37 percent expecting a heavier borrower pipeline in 12 months.
Email Chris LeBarton
Source: inman.com
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LOS ANGELES — Sales of previously occupied U.S. homes in September fell for the fourth month in a row, grinding to their slowest pace in more than a decade as prospective homebuyers grapple with surging mortgage rates and a near historic-low level of properties on the market.
Existing home sales fell 2% last month from August to a seasonally adjusted annual rate of 3.96 million, the National Association of Realtors said Thursday. That’s just above the 3.9 million unit pace that economists were expecting, according to FactSet. But it’s the slowest sales pace since October 2010, when the market was still choked by foreclosures following the housing bust several years earlier.
Sales sank 15.4% compared with the same month last year and are down 21% through the first nine months of the year versus the same period in 2022.
Despite the housing market slump, home prices kept climbing versus a year ago. The national median sales price rose 2.8% from September last year to $394,300. It slipped 3.1% from August.
“Clearly, the story of limited inventory and rising and rising mortgage rates continues to hinder the home sales market,” said Lawrence Yun, the National Association of Realtors’ chief economist.
Yun also said he expects mortgage rates will ease by next spring.
“I think this is the top,” he said. “Maybe we’ll have a few months of very difficult sales because of this high interest rate, but things should be improving next year.”
The weekly average rate on a 30-year mortgage moved above 7% in August, when many of the home sales that were finalized in September would have gone under contract. It has remained above that threshold since, surging this week to 7.63%, the highest level since 2000, according to mortgage buyer Freddie Mac.
High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in rock-bottom rates two years ago from selling.
Mortgage rates have been climbing along with the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can influence rates on home loans.
The central bank has already pulled its main interest rate to the highest level since 2001 in hopes of extinguishing high inflation, and has indicated it may cut rates by less next year than earlier expected. The threat of higher rates for longer pushed Treasury yields to their highest levels in more than a decade.
While surging mortgage rates have shut out many prospective buyers, a chronic shortage of homes for sale continues to keep the market competitive, especially for the most affordable homes.
Homes sold last month typically within just 21 days after hitting the market, and about 26% of homes sold for more than their list price, the National Association of Realtors said.
All told, there were 1.13 million homes on the market by the end of last month, up 2.7% from August, but down 8.1% from September last year, the group said. That amounts to just a 3.4-month supply, going by the current sales pace. In a more balanced market between buyers and sellers, there is a four- to five-month supply.
The combination of higher mortgage rates and rising prices has particularly hurt first-time homebuyers who don’t have any home equity to put toward their down payment. They accounted for just 27% of all homes sold last month. Historically, it was not unusual for them to make up 40% of sales.
Meanwhile, house hunters who can afford to bypass financing and pay in cash are taking up a bigger share of the market. Last month, all-cash deals accounted for 29% of all home sales, the National Association of Realtors said. Typically, all-cash transactions tend to represent about 20% of sales.
The last time all-cash transactions made up as big a slice of home sales? During the foreclosure crisis years that followed the late-2000s housing slump.
Source: ksl.com
The Mortgage Bankers Association (MBA), the Community Home Lenders of America (CHLA), and the Manufactured Housing Institute (MHI) submitted a joint letter advocating for more mortgage financing options for manufactured homes to the U.S. Department of Agriculture (USDA).
The letter, sent specifically to USDA’s Rural Housing Service (RHS), addresses a proposed rule aiming to expand financing options for manufactured home buyers and supports three key changes it would make.
The proposed rule was published in the Federal Register in August, and had its comment period extended to Oct. 31 earlier this month.
The proposal intends to allow the USDA “to give borrowers increased purchase options within a competitive market and increase adequate housing,” alongside enhancing customer experiences within the single-family housing loan program.
The associations lauded the RHS for three new recommendations, including an update to current regulatory language to meet ownership requirements for energy-efficient manufactured and modular home financing.
A second change recommends removing administrative requirements from the regulations for the review and approval of applications from manufactured housing dealers for direct loans.
Finally, RHS recommends revising the definition of “manufactured home” in the regulations to remove references to RHS Thermal Performance standards for direct loans.
“MHI, MBA, and CHLA are interested in working with RHS to explore the causes and solutions for RHS manufactured home loans so significantly trailing the ratio of manufactured home loans in the single-family home markets,” said Scott Olson, executive director of CHLA, in a statement.
In their letter, the associations committed to expanding financing options for manufactured housing to help address challenges consumers are facing from steep housing costs, low inventory levels and rising mortgage rates.
“In 2022, the price for an average manufactured home was $127,250, while the average price of site-built homes was around $413,000,” the letter said. “And, the average income of a manufactured home buyer was about $35,000, while the average income of a site-built home buyer was over $100,000.”
The RHS’ most common manufactured home loan option is the Guaranteed Loan Program (GLP), which guaranteed more than 71,000 loans in fiscal year 2022 and more than 37,000 loans in fiscal year 2023. However, manufactured homes make up a very small share of the total figures, the associations pointed out.
“Unfortunately, the RHS GLP guaranteed only 146 manufactured homes in 2022 and 177 manufactured homes in 2023,” the letter stated.
“Manufactured home loans constituted only a miniscule portion of RHS guaranteed loans – 0.2% of RHS guaranteed loans in 2022 and 0.5% of RHS guaranteed loans in 2023 – even though manufactured homes consistently make up around 10% of new single-family home starts.”
While the associations signal general support for the proposed rule in the Federal Register, they also recognize that the proposed changes are not fundamental.
“MHI, MBA, and CHLA do not consider these actions ‘game changers’ – but they are constructive, and we commend RHS for proposing them,” the letter reads. “MHI, MBA and CHLA would also like to work with you to identify other potential impediments to the ability of RHS direct and guaranteed loans to achieve their full potential with regard to financing manufactured home loans.”
The U.S. Department of Housing and Urban Development (HUD) is also turning its attention toward the needs of rural areas recently. HUD created proposals to expand broadband internet access to a greater number of rural communities.
Source: housingwire.com
The 30-year fixed mortgage rate this week climbed to 8%, reaching that level for the first time since 2000, according to Mortgage News Daily.
The milestone arrives after months of rate increases. As recently as last April, the 30-year fixed mortgage rate stood below 5%, Mortgage News Daily data shows.
An aggressive series of interest rate hikes by the Federal Reserve since last year has pushed up the 10-year Treasury bond yield, which loosely tracks with long-term mortgage rates.
The Fed has increased interest rates to fight elevated inflation, attempting to slash price hikes by slowing the economy and choking off demand.
While inflation has fallen significantly from a peak of about 9% last summer, price increases remain more than a percentage point higher than the Fed’s inflation target.
The persistence of elevated inflation has prompted the Fed to espouse a policy of holding interest rates at high levels for a prolonged period, which in turn has increased the 10-year Treasury yield and put upward pressure on mortgage rates.
Mortgage rates have increased for five consecutive weeks, according to data released by Freddie Mac last Thursday.
Major housing industry groups voiced “profound concern” about rising mortgage rates in a letter last week that urged the Federal Reserve to stop hiking its benchmark interest rate.
“The speed and magnitude of these [mortgage] rate increases, and resulting dislocation in our industry, is painful and unprecedented,” wrote the real estate groups, among them the National Association of Realtors and the National Association of Home Builders.
High mortgage rates have dramatically slowed the housing market, since homebuyers have balked at the stiff borrowing costs, and home sellers have opted to stay put with mortgages that lock them into comparatively low rates.
Mortgage applications have fallen to their lowest level since 1996, the Mortgage Brokers Association said earlier this month.
Sales of previously owned homes, meanwhile, plummeted more than 15% in August compared to a year ago, according to the National Association of Realtors. The slowdown has coincided with a sharp rise in costs for potential homebuyers.
When the Fed initiated the rise in bond yields with its first rate hike of the current series, in March of 2022, the average 30-year fixed mortgage rate stood at just 4.42%, Mortgage News Daily data shows.
Each percentage point increase in a mortgage rate can add thousands or even tens of thousands in additional costs each year, depending on the price of the house, according to Rocket Mortgage.
Speaking at a press conference in Washington, D.C., last month, Fed Chair Jerome Powell acknowledged the continued effect on mortgages of rising interest rates, noting then that activity in the housing market “remains well below levels of a year ago, largely reflecting higher mortgage rates.”
The Fed expects to raise rates one more time this year, according to projections released last month. The central bank plans to make its next rate-hike decision in early November.
Source: abcnews.go.com
Between rising mortgage rates and soaring loan production costs this year, many lenders and brokerage leaders are reducing headcount to preserve their bottom line.
As a result, many mortgage and real estate professionals may find themselves checking out LinkedIn, whether to search for a new position or make connections in anticipation of the future.
No matter your position, networking is a crucial skill.
“Whether you’re a recruiter that relies solely on daily calls and emails to make connections or someone in a sales role that utilizes networking as a way to grow their business, it’s useful to understand how to approach each outreach to ensure you’re presenting yourself in the best light,” said Tracy Chongling, producing branch manager at Supreme Lending.
Chongling often receives calls and messages from people looking to connect with her, but often finds the initial contacts very “cold and generic, almost robotic.”
“Obviously I would not expect an individual to build an instant relationship or rapport on the first meeting; however, the ‘canned’ messages and templates being used really show that there is no real interest in me as an individual,” she said.
“I have received several emails and social media messages with a salutation addressed to someone else — if that doesn’t scream copy and paste, I don’t know what does.”
Chongling shared some strategies for smarter outreach and networking for those looking to make connections.
The first thing to do when you’re looking to network is to know what you’re looking to accomplish by making new connections.
For example, if you’re a recruiter, you would want to know what each job entails and look for individuals with those skill sets. Or if you work in mortgages or real estate, you may be looking to grow your book of business with potential homebuyers, sellers or new referral partners.
“The key to any outreach is purpose,” Chongling said. “What purpose do you have when reaching out? And what purpose can you bring to the person you are reaching out to?”
Once you know what you’re looking for, prepare for outreach by researching the person you want to connect with.
Chongling said she often receives calls where the caller brings up the company she was at previously when she’s been at her new company for a year.
“If you even looked me up as a whole, it shows my new company name, but you didn’t do that,” she said. “You just saw my name, maybe my production numbers, and ran with it. You didn’t even take the time to see who I am.”
Research allows you to better understand who it is you’re hoping to connect with and shows that person that they are important enough to prepare to speak with.
Social media can be a great way to see a bit more about a person ahead of time, including their personality, interests, work history and even family life.
“It helps put the human aspect into the networking attempt,” Chongling said. “If you are connected on social media, maybe add something about a recent post they made or include a clip of an article they wrote.”
One thing that’s lacking in networking is authenticity, Chongling said.
“One of the easiest ways that people can build lasting relationships through networking is to understand that every interaction is a chance to get to know one another better,” she said. “Don’t approach networking as a chore or a job — think of it as a way to connect with like-minded individuals that could help open doors down the road or even turn into friendships.”
You can show authentic interest by asking open-ended questions, listening intently, learning how you can bring value to each other and being honest.
“Remember that just like everything in life, long-lasting professional relationships are built on trust and a level of comfort,” Chongling said.
It may sound obvious, but being present in every interaction is key to networking successfully. In this fast-paced environment, everyone is focused on numbers and instant gratification.
Slowing down to actually focus on the conversation and even picking up the phone or meeting in person can make a big difference.
“Hearing someone’s voice, you can tell sometimes if they’re preoccupied,” Chongling said. “I would say, ‘Smile and dial.’ I think that that impacts people a little bit more.”
The final piece of successful networking is to follow through and be persistent. Real estate and mortgages are not businesses of one-time communication and that’s it — rejection is part of the job. But so is following up.
“You never know, when you network with the right people, who you may cross paths with again later down the road,” Chongling said. “I don’t bother people, but I know three to five years down the road, someone’s situation may change.
“If I treated them fairly and showed them that I cared about who they were and I got to know them on a personal level, they’re more inclined probably to reach out to me.”
Ultimately, even if someone isn’t ready to build a relationship or transact with you right then, they may be later. How you treat them in every moment matters both in the present, but for the future.
Improving your networking skills is a way to not only form important working relationships but also gives you a step up the next time you need to find a job.
“There’s a lot of staff that are making their exit from the mortgage business,” Chongling said. “I think it’s a great time for really skilled networkers and recruiters to get up there and really try to find a way to show their value proposition to people.”
Source: housingwire.com
In addition to discussing Zillow’s financial results and the continual evolution of its Housing Super App vision on its third quarter earnings call, CEO Rich Barton and Zillow executives took time to address the elephant in the room: the verdict of the Sitzer/Burnett commission lawsuit.
While the industry has yet to find out what Judge Stephen Bough’s injunction will say and the three defendants, the National Association of Realtors, Keller Williams and HomeServices of America, have vowed to appeal the decision, Barton believes his firm will thrive regardless the outcome.
In his remarks about the suit, Barton said Zillow is a strong supporter of free, fair and transparent access to real estate information, independent representation, and transparent and negotiable agent commissions.
“From where we stand it seems clear that these principles are in the best interest of mover consumers, agents and the industry as a whole,” Barton said. “We expect industry changes resulting from this lawsuit or ones like it will involve commission transparency and negotiability provisions similar to those seen in several of the settlement the plaintiffs entered into with other real estate franchisors in advance of the trial.”
Barton also told listeners that Zillow believes complete disruption to the existence of buyer’s agents is improbable, as the firm believes it is important for buyers to have someone looking after their interests in the homebuyer transaction. However, if buyer’s agency does disappear, Zillow is considering models where the U.S. market transitions to one where one or two large listing portals offer pay-to-play inclusion on a digital listings marketplace.
“In this scenario, Zillow would be an odds on favorite to become the leading digital listings marketplace, given our brand, traffic, engagement and our unique focus on solving movers real pain points,” Barton said.
Despite what Barton believes would be an advantage for his firm, he said Zillow is not advocating for this to happen.
“We believe the pay-to-play marketplace is a step backwards for consumers and the industry as a whole and we very much like our position and growth plan in a market structure the continually evolves towards our principles of access, independence and transparency,” he said.
Despite a slower residential housing market environment caused by rising mortgage rates and low housing inventory, Zillow Group still managed to record an annual increase in revenue in the third quarter of 2023.
The real estate behemoth recorded $496 million in revenue, an increase of 3% year over year. The firm’s residential sector was responsible for $392 million of the overall revenue. The sector’s revenue for the quarter was down 3% annually, which Zillow executives were pleased with given the macro environment.
Zillow was also pleased with the performance of its mortgage sector, Zillow Home Loans, which reported an 88% year-over-year increase in purchase loan origination volume for the quarter. Even with this massive increase, Zillow Home Loans still recorded an 8% annual decline in mortgage revenue to just $24 million.
The firm’s mixed bag of revenue results garnered Zillow a net loss of $28 million for the quarter, which represents an improvement over the $53 million net loss it reported in Q3 2022.
“Today we are focused on delivering the Housing Super App, a tech enabled end-to-end platform with products and services that make it easier for people to move,” Barton told investors and analysts listening to the firm’s Q3 2023 earnings call Wednesday evening. “You’ve heard me say many times that 2023 is crucial for Zillow. It’s a year of execution as we prepare to scale in 2024 and 2025. We are very pleased with what we’ve accomplished today.”
While much of the call was given over to discussion of the Sitzer/Burnett suit, to which Zillow is not a party, none of the call featured discussions of the REX Real Estate false advertising lawsuit, in which Zillow, the only defendant, emerged triumphantly less than a month ago.
Originally filed by REX in March 2021, against Zillow and NAR, the lawsuit alleged that changes made to Zillow’s website “unfairly hides certain listings, shrinking their exposure and diminishing competition among real estate brokers.”
Despite the verdict, it does not appear that Zillow’s legal battle with REX is over. On Tuesday, the now defunct discount brokerage, filed a motion seeking a new trial.
In the motion, REX claimed that during the initial trial the court “gave an improper and case dispositive affirmative defense instruction on REX’s claim under the Washington Consumer Protection Act.”
REX claims that this enabled Zillow to “improperly escape liability for knowingly creating a deceptive and unfair web site by simply convincing the jury that it benefitted from doing so.”
Source: housingwire.com