It’s no secret that housing prices have been quickly climbing over the past decade — the median home value in the U.S. is higher than ever before, at almost $220,000, and some markets, like San Jose, Las Vegas and Atlanta, are reporting double-digit annual home value growth in the U.S. Markets .
But understanding what buyers can get for their money, and how homeowners’ investments have grown over time, can be tough — especially when the footprint of homes themselves haven’t changed much. To help with this, Zillow Research created a map, released today, that allows users to see just how much a dollar gets you in each market, and how this has changed over time.
For example, one dollar will buy you 1.07 square inches of the typical U.S. home, but ten years ago, one dollar bought you 1.23 square inches. Back in 1998, one dollar bought you 2.09 square inches. For reference, one square inch is about twice the size of a postage stamp, and a dollar bill itself is a little more than 13.25 square inches.
However, in the city of San Jose, where the typical home is worth almost 84 percent more than it was twenty years ago, one dollar will buy you just 0.20 square inches of a home. In 2008 it bought you 0.37 square inches, and back in 1998, one dollar bought you almost one full square inch.
Your dollar will go the furthest in Memphis, Tenn., buying more than 2.5 square inches of a home. Expect to get the smallest amount of space for your dollar in San Francisco, where one dollar will buy you just 0.14 square inches.
Fresno falls almost exactly in the middle of Memphis and San Francisco for the space you can get for one dollar, where it will buy you 0.97 square inches of a home.
“A dollar today isn’t what it used to be, particularly when it comes to real estate in light of the rapid pace of home-value appreciation that the American economy has witnessed over the past half-decade,” said Zillow senior economist Aaron Terrazas. “A dollar gets you about 20 times more space in an affordable market like Memphis than in a pricey place like San Francisco. Figuring out exactly how much space a dollar does – or doesn’t – buy you can be sobering, but enlightening. The space we live in is a tangible thing, with real value, and this shows how true that is.”
Home values across the country rose 8 percent over the past year, and Zillow is forecasting them to appreciate another 6.8 percent over the next 12 months. Over the past year, home values in the cities of Baltimore, San Jose, Las Vegas and Dallas appreciated the most.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
With rent prices at an all-time high, finding affordable housing is becoming more challenging for all renters. Right now, the average rent for a one-bedroom apartment is $1,722 and the average rent for a two-bedroom apartment is $2,047.
For low-income renters, finding a safe and affordable place to rent is even more difficult. Government programs like Section 8 are in place to help ease the financial burden of rent. But what is Section 8 exactly and how do you find apartments that accept Section 8?
We’ll walk you through the basics of Section 8 and help you understand what it is, who is eligible and how to apply for it. Here’s everything you need to know about Section 8.
What is Section 8?
Section 8, formally called the Section 8 Housing Choice Voucher Program, is a government-funded program run by the U.S. Department of Housing and Urban Development (HUD).
The program aims to help people find and pay for affordable and decent housing. The program gives monthly financial assistance to over 1.2 million households who are struggling to pay rent based on their annual income, which must fall below a certain threshold to qualify for Section 8.
Section 8 housing is not limited to low-income or subsidized housing areas only. Section 8 housing is single-family homes, apartments or townhomes. It’s up to the landlord or property management company to decide whether or not they accept Section 8 vouchers. Some states require landlords to accept Section 8, while other states do not. You’ll want to check with your local government to understand what rules are in place regarding Section 8.
Who is eligible for Section 8?
To qualify for Section 8, applicants must be U.S. citizens (in most cases) and fall under a certain income bracket. While that bracket varies based on the city or area you live in, it generally looks like this:
You make 30 percent of the median income in your area
You make 50 percent of the median income in your area
Typically, priority is given to renters who make less than 30 percent of the median area income as they fall within the category of extremely low income. The local public housing authority must give 75 percent of the Section 8 vouchers to those who make less than 30 percent of the area’s median income. Section 8 will take into consideration all of the gross income generated by people in the household.
Here’s a real-world example for a prospective Section 8 renter living in Los Angeles. The median income in Los Angeles is $71,358 annually. If someone makes $21,407 or less — which is 30 percent of the median L.A. income — they’d qualify for Section 8. To see what the median income in your area is, check out the Quick Facts section of the Census Bureau.
Section 8 does not cover the entire cost of the rent. It subsidizes a portion of it. Typically, Section 8 has the renter pay 30 percent of their salary towards rent and then, Section 8 vouchers cover the remaining rent due.
Section 8 is not an emergency rental assistance program, so keep that in mind if you’re applying for it. It can take weeks or even months to qualify for Section 8. There are often long wait times to receive Section 8 and, generally, only 1 in 4 people receive assistance immediately.
How to apply for Section 8
Section 8 housing can exist anywhere that landlords choose to participate. It’s not limited to certain cities or neighborhoods. Because specific geographic areas determine the eligibility factors, you’ll need to apply through the local public housing authority or PHA.
Here’s a step-by-step process on how to apply for apartments that accept Section 8.
Find your local PHA contact information
Download the PDF with each county’s contact information
Submit an application to verify your eligibility
Wait for approval
Once approved, you’ll either receive your Section 8 voucher or be placed on the waiting list
If you’re placed on a waiting list, here are some tips on how to gauge the actual wait time:
Ask your PHA for a time estimate
Ask your PHA how long the wait list is to see how many people are on it
Ask your PHA for information about the turnover rate to see how quickly the wait list moves
Understand that larger cities usually have longer wait times
Wait times vary city by city but it can take weeks or months to finally receive Section 8 assistance.
Finding apartments that accept Section 8
So, you’ve qualified for Section 8 housing and you’re off the waitlist. Now, it’s time to find an apartment that accepts Section 8 so you can start the apartment search and application process.
Usually, you’ll have 90 days to find an apartment that accepts Section 8. Once you find a place that accepts Section 8, you’ll need the PHA to inspect and approve the unit and the lease. This helps ensure you’re renting a clean, safe and livable place that meets HUD criteria.
There is not a one-size-fits-all approach to finding an apartment or landlord that accepts Section 8, but here is our advice on how to start your apartment search.
Search Rent. using the “income-restricted” filter and ask the prospective landlord if they accept Section 8 vouchers
Use the HUD interactive map to see which areas and apartment complexes accept Section 8
Conduct a basic Google search to see what comes up in your area
Work with non-profit groups that specialize in low-income housing assistance
Settling into your new apartment that accepts Section 8
Now that you’ve qualified for Section 8 and found an apartment that accepts Section 8 vouchers, you’ll want to consider a few other things to set you up for success in your place. Understand the cost of the utilities and security deposits so you can budget accordingly. Also, make sure you thoroughly understand the terms of the agreement of Section 8 — read the fine print! Once you’ve done those things, it’s time to move in and enjoy your new apartment and home.
Sage Singleton is a freelance writer with a passion for literature and words. She enjoys writing articles that will inspire, educate and influence readers. She loves that words have the power to create change and make a positive impact in the world. Some of her work has been featured on LendingTree, Venture Beat, Architectural Digest, Porch.com and Homes.com. In her free time, she loves traveling, reading and learning French.
The devastation wrought by wildfires is exacerbating a long-running housing crisis on the island of Maui, pitting locals and Native Hawaiians — many of whom rent — against billionaires and real estate developers, the Washington Post reported Monday.
The future of Lahaina, an island community that is a spiritual and cultural capital, is of concern for many locals who are uncomfortable with the encroachment of wealthy outsiders. Tamara Paltin, who represents the area on the Maui County Council, said the crisis may accelerate a process where wealthy outsiders squeeze out locals by snapping up properties.
“If all those people from outside with a lot of resources come in and rebuild Lahaina the way they want it to be, it won’t be Lahaina anymore,” Paltin told the Post. “We don’t want to make it like Anywhere Else, USA.”
Last Tuesday and Wednesday, the fires destroyed approximately 3,000 structures, with Lahaina most acutely devastated by the disaster. As of late Monday night local time, the death toll stands at 99, but officials expect the figure to rise as searches continue.
Some locals are reluctant to talk to opportunistic real estate agents offering to buy fire-affected properties, the report said. Even before the crisis, rising property prices risked displacing locals and Native Hawiaiians, with Hawaii having the highest cost of living across U.S. states. A family of four earning less than $93,000, for example, would be considered low income.
“We want to make sure that we’re able to keep Lahaina Lahaina, and Lahaina strong,” Archie Kalepa, a Native Hawaiian community leader, told the Post. “We don’t want it to be Lahaina was.”
The Federal Emergency Management Agency (FEMA) has activated its disaster relief housing programs, which include providing funds for displaced residents to temporarily stay in hotels. A local real estate agent organization is also seeking out vacant vacation homes to lodge survivors.
FEMA Administrator Deanne Criswell, pledged to be “very creative” in the way the agency will exert its authority, acknowledging that disaster relief approaches on the U.S. mainland may not work in Hawaii. Bringing tiny homes or other transitional housing units to the island are on the table, but such relief isn’t likely to resolve longstanding housing problems.
As mega-fires continue to threaten communities amid climate change, the gap between rich and poor is expected to get wider, the report said. Native Hawaiian families whose houses were passed down through generations could experience significant financial strain: Many of these properties don’t have mortgages and thus aren’t required to have insurance.
The community is pulling together to combat changes that may affect their future on the island.
“When it’s time, we will all rebuild one day at a time,” said Doreen Buenconsejo, a Maui local whose parents lost their home, to the Post. “I know our community is so strong that we will pull together and help each other to clean up our lands.”
Fires are becoming increasingly frequent and destructive across the nation, particularly along the West Coast. Your homeowners insurance usually includes fire insurance, safeguarding against all accidental blazes. However, the specifics of your coverage can vary depending on where you live, especially if you own a home in wildfire territory.
So what is fire insurance, what does it cover, and how is it changing? Whether you live in a city with high-fire risk like Brentwood, CA, or in low-risk Duluth, MN, this Redfin article has everything you need to know.
What is fire insurance?
Fire insurance is a specific type of insurance coverage that compensates homeowners for accidental damage caused to their property by fire. It’s often included as part of a standard homeowners insurance policy, but depending on where you live and the specifics of your policy, the coverage can vary.
Does homeowners insurance cover fires?
Yes, homeowners insurance usually covers all fires, including wildfires. In fact, fire coverage is one of the foundational elements of most standard homeowners insurance policies. Here’s a breakdown of what’s generally covered in the event of a fire:
Dwelling coverage: This covers the structure of your home, including walls, roofs, and built-in appliances. If a fire damages or destroys any part of the physical structure of your home, this portion of your policy would help pay for repairs or rebuilding.
Personal property coverage: This covers your belongings inside the home, such as furniture, clothing, electronics, and other personal items. If these are damaged or destroyed by fire, your policy would help compensate you for their value, either at actual cash value (which accounts for depreciation) or replacement cost (which doesn’t factor in depreciation), depending on your policy.
Detached structures: If you have other structures on your property, like a garage, shed, or fence, these are typically covered under a standard homeowners policy if they’re damaged or destroyed by fire.
Loss of use or additional living expenses: If a fire makes your home uninhabitable, this portion of your policy can help cover the costs of living elsewhere temporarily, such as hotel bills, meals, and other associated expenses.
Liability protection: If someone is injured on your property as a result of the fire, or if you accidentally cause a fire that damages a neighbor’s property, this part of your policy may cover legal or medical expenses.
What doesn’t fire insurance cover?
While fire insurance is designed to provide broad coverage for damages resulting from fires, there are certain exclusions and scenarios that might not be covered by a standard policy. Here are some common limitations:
Intentional fires (arson): If the fire is determined to have been set intentionally by the homeowner or with their knowledge, the insurance will not cover the damages.
Vacancy: If a property has been vacant for a specified period (typically more than 30 days), damages from a fire might not be covered. Insurance companies see vacant properties as higher risks for vandalism, theft, and neglect.
War and nuclear hazard: Damages resulting from war, including undeclared war, civil war, insurrection, rebellion, or revolution, are typically excluded. Similarly, fires resulting from nuclear reactions or radiation are not covered.
Other perils: If a fire results from an earthquake, landslide, power outage, neglect, faulty design or materials, or ordinance of law, insurance may not cover your property.
How is fire insurance changing?
With the increasing frequency and intensity of wildfires, especially in places like California, insurers are reevaluating their risk models. Recently, State Farm stopped offering homeowners insurance entirely in California in early 2023. This has led to much higher premiums from other companies in some areas and even refusal to insure homes in particularly high-risk zones. These changes follow the most destructive wildfire seasons in the state’s history, with 11 of the state’s 20 largest wildfires occurring in the past five years.
This follows a trend in other states across the country ravaged by climate change-induced disasters. For example, in parts of Kentucky ravaged by flooding in 2022, flood insurance rates are set to quadruple. Similarly, insurance companies in Florida and Georgia are raising rates due to more frequent hurricane damage.
Insurance markets are regulated by local and federal governments, and many states and counties are struggling to keep their residents insured. In areas frequently hit by wildfires, state governments are stepping in to ensure homeowners can access affordable fire insurance. This might include offering subsidies, such as through high-risk pools.
What can you do?
If your home is at risk of wildfires, there are actions you can take to lower your insurance rates and help keep your coverage. Installing fire protection devices, like smoke detectors, fire alarms, sprinkler systems, and smart home security systems can all help lower your premiums.
It’s also essential to understand the specifics of your coverage. The more transparent and comprehensive your policy is, the better off you are in the case of a disaster.
Final thoughts
Fire insurance is a vital safety net for homeowners, ensuring that they can rebuild and recover after a devastating fire. As the world changes, so too does the landscape of fire insurance. Homeowners should regularly review their policies, stay informed about changes in the industry, and consider the evolving risks and benefits associated with their property.
The chasm runs the full length of the condominium complex, from the shuttered tennis court to the shuttered pool. Measuring more than 500 feet long and 20 feet wide, the gash divides the complex in two, its weed-choked perimeter cordoned off with chain-link fencing. A grimy trickle of water oozes along the chasm’s concrete floor a dozen feet below, like some ugly open wound that just won’t heal.
Welcome to Coyote Village, a 70-unit condo complex in suburban La Habra whose residents have been living out a homeowner’s nightmare. Over the last four years, portions of the tree-lined greenbelt that once shaded the complex have violently collapsed into a concrete maw below. That’s because, unbeknownst to most residents, the greenbelt wasn’t built on solid earth. Running beneath it is a cavernous flood channel that decades ago was sealed with a concrete lid then topped with mounds of soil and landscaped with pine trees.
The first collapse of the concealed lid came in January 2019, when a section of the greenbelt near the tennis court caved in, exposing the flood channel below. The second implosion came in March, when heavy winter rains saturated the greenbelt and the concrete lid couldn’t handle the weight of the soggy soil and towering pines. This time, the collapse took out a huge swath of the greenbelt near the community pool.
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Most residents were shocked to learn that their complex was built on top of a private canal that plugs into Orange County’s larger Imperial Channel, which routes storm water out of La Habra, Brea and Fullerton. It stood as the only covered private channel in the county’s 380-mile public storm drain system.
And that “private” designation is where the residents’ encountered another chasm, in the form of a years-long legal battle.
After the 2019 collapse, the county did some cleanup work at the site and provided security fencing around the exposed portion of the channel. Following the March 15 collapse, La Habra brought in construction crews to excavate the channel, which at that point was clogged with dirt, tree limbs and concrete that the city worried would create a damming effect in the broader drainage system during future storms.
But the city’s work stopped there.
La Habra officials have argued since the first collapse that the channel belongs to the complex. And worse, that the channel’s concrete lid had been improperly covered with a breadth of landscaping that violated what had been approved in the city permitting process. According to the city, the homeowners association that represents Coyote Village is responsible for repairing and rebuilding the channel.
The Coyote Village Homeowners Assn. has challenged that stance in a running legal battle, started in 2020, contending the channel is integral to a larger public system and was damaged by public use without just compensation. It has sued the city, the county and the county flood control district, among others, for relief.
“While the conduit runs through the HOA property, the water is public,” said John Peterson, an attorney representing the homeowners group. “The public needs to share in the responsibilities.”
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State Sen. Josh Newman, a Democrat whose district encompasses La Habra, tried to broker a solution last summer and was able to secure $8.5 million in state funding to repair the flood channel. “The residents were wholly unprepared and financially unequipped to deal with this,” Newman said. “I was happy to secure those funds.”
But a year later, that money remains unspent.
La Habra initially questioned the propriety of expenditure, asking the state Atty. General’s Office if the allocation could be considered an improper gift of public funds. The state’s Legislative Counsel determined it was not. In the months since, the city and homeowners association have haggled over who would run the major construction project, with the HOA concerned it does not have the expertise and city officials reluctant to take charge of repairs on a canal they consider private property.
Residents have watched in a mix of frustration and resignation as the saga has unfolded.
Jan Duncan, an HOA board member, said she put her Coyote Village loft on the market in June and received six offers the first week. Then came questions about the flood channel and why it hasn’t been fixed in four years. In short order, every offer was rescinded.
“I cannot give buyers anything in writing to guarantee that this is going to be resolved,” she said. “Without that, they’re uncomfortable. I can’t blame them.”
Justin Marinello is among the parents in the complex who worry about the safety risk the exposed channel poses for children. His condo looks out on the gritty channel and his 4-year-old son had a front-row view of the city’s excavation work after the March collapse.
“My son enjoyed watching the construction because he likes giant Tonka toys playing with dirt,” Marinello said. “But it would be nice to be able to open the door up and just have some grass for him to run on.”
On the other side of the chasm, Lizeth Ruiz knew about the exposed channel when she moved to her condo in 2019 but figured it would be quickly repaired. Instead, she finds herself fending off mosquitoes that breed in the canal’s dingy water. “Now, I keep everything closed and have to be more mindful about wearing pants instead of shorts,” Ruiz said, holding her newborn baby tight.
As the summer heat soars, the concrete channel is lined with dry weeds that rise taller than the 6-foot safety fencing. The channel itself is defaced with graffiti. Residents continue to pay $390 in monthly homeowners fees even though the channel’s collapse has sidelined amenities like the tennis court and pool.
It marks a wrenching chapter in the life of a property with an eccentric history.
In mid-century La Habra, a ranch owner flooded a portion of the area to create a lake and islet, deemed “Monkey Island,” where he let feral monkeys roam free. He also eyed the land for a track that would host ostrich races. At the time, ostrich farms were a popular tourist attraction in Orange County.
Later, the lake was drained and La Habra city leaders opted to go a development direction they considered more forward-thinking, erecting a shopping plaza and post office on the site.
In 1978, developer Loren Hendrix proposed an adjacent 70-unit condominium complex, when such communities were still novel in Orange County as an affordable alternative to single-family homes. Without yards to maintain, he envisioned residents being able to stroll along a landscaped creek — a dressed-up version of the flood control channel that crossed the property — as a key selling point.
But Hendrix faced stiff questions from city staff about how he planned to protect children from hazards posed by the channel-turned-creek. Archival records show the county flood control district rejected Hendrix’s creek design. The district recommended design changes Hendrix considered too costly. Instead, the complex would host an enclosed flood channel masked with landscaping.
La Habra City Council members approved the development in April 1979 on the condition that Hendrix’s design be approved by the city’s chief building inspector and the county flood control district. A year later, the building inspector wrote that the complex was “substantially in compliance” with applicable codes. It’s not clear in county records whether the flood control district ever approved the design.
In any case, the condo development and greenbelt were built. And for 40 years, storm runoff flowed through the underground channel unbeknownst to most residents until the 2019 collapse.
La Habra city officials say the cave-ins are more about what was built on top of the channel than what lies below.
Deputy City Atty. Gary Kranker contends that at the time of the 2019 collapse the soil piled above the channel ran 9 feet deep — 6 feet more than the greenbelt design approved by the city — and that the pine trees that by then stood 80 feet tall contributed to the channel lid’s failure.
“It’s the obligation of the individual constructing the channel, or in this case, the channel roof, to make sure it was done properly,” he said. “Based upon the calculations that we have, it would have been done properly had it only had 3 feet of soil.”
And he faults the homeowners association for failing to take aggressive action to alleviate the risks between the first cave-in and the implosion in March. “To be quite candid, [they] did not do anything to try and alleviate this condition,” he said. “They could have hired someone to remove the soil, one wheelbarrow at a time.”
Last year, the homeowners association sued Hendrix, the complex developer, for fraud. The complaint alleged that he concealed the channel and any maintenance responsibilities from the association so he could sell condos “more quickly and at higher prices.” Peterson, the association’s attorney, said a settlement agreement compels Hendrix to find the insurance policies that covered the development and assign the rights over to the association.
Hendrix did not respond to requests for comment through his attorney.
Last week, representatives for the city and homeowners association said they were closing in on an agreement for moving forward with repairs that would free up the $8.5 million in state funding. Once a resolution is reached, the canal’s reconstruction is expected to take at least a year.
Roma Damo, who has lived at Coyote Village for 35 years, doesn’t see much light at the end of the tunnel — or flood channel, in her case.
“I’m seriously thinking about renting this condo out and getting myself an apartment,” said Damo, 88, eyeing the degraded channel outside her condo windows. “I don’t want to spend the rest of my life here looking at this.”
Home buyers were more active in purchasing newly constructed properties in July, rebounding from the month prior, with Federal Housing Administration and Veterans Affairs loan applications driving the increase, according to the Mortgage Bankers Association.
Loan volume for this segment jumped by 0.2% from June and was up 35.5% compared to the year prior, the trade group’s Builder Application Survey found. This is despite a volatile mortgage market where the conforming 30-year fixed rate mortgage has hovered at or above 7%.
The overall number of new single-family home sales was at a seasonally adjusted annual rate of 677,000 units in July 2023, a 1.5% decrease from the month prior. Unadjusted new home sales reached 56,000 in July, a 6.7% decrease from 60,000 new home sales in June.
“Applications for purchase loans on newly constructed homes remained strong in July, up 36% annually, as new homes continued to account for a growing share of homes available for sale,” said Joel Kan, deputy chief economist at the MBA in a written statement Tuesday.
Conventional mortgages continued to dominate the share of applications, making up 65.3% of all loans, slightly down from 65.5% the month prior. The percentage of U.S. Department of Agriculture loans remained unchanged at 0.3%.
However, the two categories which saw growth were the share of VA and FHA applications, which increased to 10.2% and 24.2%, respectively. The FHA share in July represented its highest since May 2020, noted Kan.
“FHA purchase loans are a popular option for many first-time homebuyers and this increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions,” he said.
Meanwhile, the average loan size for new homes decreased from $400,281 in June to $397,148 in July, the survey said. In May, the average loan size was $403,581.
Another reason sellers are staying put is because they bought recently; a record 60% of mortgage holders have lived in their home for four years or less, further contributing to the supply shortage
SEATTLE–(BUSINESS WIRE)–
(NASDAQ: RDFN) — More than nine of every 10 (91.8%) U.S. homeowners with mortgages have an interest rate below 6%, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. That’s down just slightly from the record high of 92.9% hit in mid-2022.
That means well over92% of homeowners with mortgages have mortgage rates below the current weekly average of 6.71%, which is near the highest level in over 20 years. Homeowners holding onto their comparatively low mortgage rates is the main reason for today’s major shortage of new listings. Here’s the full breakdown of where today’s homeowners fall on the mortgage-rate spectrum:
Below 6%: 91.8% of U.S. mortgaged homeowners have a rate below 6%, down from a record high of 92.9% in the second quarter of 2022.
Below 5%: 82.4% have a rate below 5%. That’s down from a peak of 85.7% in the first quarter of 2022.
Below 4%: 62% have a rate below 4%, also down from a record high (65.3%) hit in the first quarter of 2022.
Below 3%: 23.5% an interest rate below 3%, near the highest share on record. The highest was 24.6% in the first quarter of 2022.
Many would-be sellers are staying put rather than listing their home to avoid taking on a much higher mortgage rate when they purchase their next house. This “lock in” effect has pushed inventory down to record lows this spring. New listings of homes for sale and the total number of listings have both dropped to their lowest level on record for this time of year, which is fueling homebuyer competition in some markets and preventing home prices from falling further even amid tepid demand.
Even though the share of homeowners with mortgage rates below 5% or 6% has come down slightly because more people have bought homes with today’s elevated rates, it’s still true that nearly every homeowner would take on a higher mortgage rate if they moved. That’s making most people who don’t need to move stay put, which means it’s slim pickings for buyers. Pending home sales are down about 17% from a year ago.
“High mortgage rates are a double whammy because they’re discouraging both buyers and sellers–and they’re discouraging sellers so much that even the buyers who are out there are having trouble finding a place to buy,” said Redfin Deputy Chief Economist Taylor Marr. “The lock-in effect is unlikely to go away in the near future. Mortgage rates probably won’t drop below 6% before the end of the year, and most homeowners wouldn’t be motivated to sell unless rates dropped further. Some of them simply don’t want to take on a 6%-plus mortgage rate and some can’t afford to.”
Just over one-quarter (27%) of U.S. homeowners who are considering listing their home in the next year would feel more urgency to sell if rates dropped to 5% or below. That’s according to a Redfin survey conducted by Qualtrics in early June. Roughly half (49%) would feel more urgency if rates were to drop to 4% or below, and the share increases to 78% if they were to drop to 3% or below—a situation that is highly unlikely any time in the near future.
“The only people selling right now are the ones who need to,” said Atlanta Redfin Premier agent Jasmine Harris. “The last three potential sellers I’ve met are people who are moving out of the country. I’m also working with someone who’s moving out of town for a new job and another person who needs a smaller home for health reasons. So there are some homes coming on the market, but not nearly as many as there would be if rates weren’t so high. In more typical times, we’d also have people selling simply because they wanted to move to a different neighborhood or wanted a bigger home and/or one with different features.”
The typical monthly mortgage payment has increased $1,000 over the last three years as rates have risen from record lows and home prices have increased
The typical homebuyer purchasing today’s median-priced U.S. home (roughly $380,000) at the current average 6.7% mortgage rate would take on a monthly payment of roughly $2,600, a record high. That’s up more than $300 from a year ago and up more than $1,000 from three years ago, using the median sale price and average mortgage rates from those time periods.
Nearly everyone has a mortgage rate below the one they would get if they bought a home today, but the difference in monthly payments varies depending on each individual situation. A mortgage holder in the 3% to 4% range is more likely to feel handcuffed to their home than someone in the 5% to 6% range, for instance.
A record share of mortgage holders have lived in their home for 4 years or less, further holding back supply
More than half of (59.7%) homeowners with mortgages have lived in their home for four years or less, a record high and up from 47.3% during the fourth quarter of 2019, just before the pandemic began.
The portion of people who haven’t lived in their home long has shot up because so many people purchased homes during the pandemic, motivated by record-low mortgage rates and remote work. That means that even if rates were to drop significantly, it may not lead to a flood of new listings. Many people are likely to stay put simply because they moved recently and aren’t in a hurry to move again.
To read the full report, including charts and methodology, please visit: https://www.redfin.com/news/high-mortgage-rates-lock-in-homeowners-2023
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country’s #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we’ve saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 5,000 people.
For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin’s press release distribution list, email [email protected]. To view Redfin’s press center, click here.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230614277242/en/
With strong demand and limited options for existing homes, many homebuyers are turning to new construction.
Mortgage applications for new construction home purchases increased 35.5% in July on a year-over-year basis, according to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data. On a monthly basis, applications ticked up by 0.2%. This change does not include any adjustment for typical seasonal patterns.
MBA’s survey tracks application volume from mortgage subsidiaries of homebuilders across the country.
“Applications for purchase loans on newly constructed homes remained strong in July, up 36% annually, as new homes continued to account for a growing share of homes available for sale,” said Joel Kan, MBA’s vice president and deputy chief economist.
Overall, 24.2% of purchase applications came from the FHA , the highest share since May 2020. Additionally, the share kept increasing in four of the last five months.
“FHA purchase loans are a popular option for many first-time homebuyers and this increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions,” added Kan.
According to MBA estimates, new single-family home sales were running at a seasonally adjusted annual rate of 677,000 units in July 2023. It’s down 1.5% from the June pace of 687,000 units. On an unadjusted basis, MBA estimates that there were 56,000 new home sales in July 2023, a decrease of 6.7% from 60,000 new home sales in June.
Conventional loans made up for the majority of loan applications
By product type, conventional loans made up 65.3% of loan applications. Meanwhile, FHA loans composed 24.2% of total loan applications while RHS/USDA loans composed 0.3% and VA loans composed 10.2%. Simultaneously, the average loan size for new homes decreased to $397,148 in July from $400,281 in June.
However, the 7% mortgage rates and reduced housing affordability pushed down the homebuilder’s confidence index, which fell to 50 in August. New home sales also dipped 2.5% in June.
The Office of Thrift and Supervision (OTS) today asked the banking institutions it regulates to halt foreclosures on all owner-occupied properties until the Financial Stability Plan’s loan modification program is in place.
Yesterday, Treasury Secretary Timothy Geithner unveiled the multifaceted program, but said the housing portion of the plan would not be available for perhaps a few weeks.
However, Geithner did note that $50 billion would be committed to prevent “avoidable foreclosures,” using a system similar to that in action over at FDIC-controlled Indymac Federal.
“OTS-regulated institutions would be supporting the national imperative to combat the economic crisis by suspending foreclosures until the new Plan takes hold,” OTS Director John Reich said in a release.
It’s not totally clear how the program will work, but it will likely be a blend of mortgage rate and principal balance reductions, to ensure homeowners have both affordable mortgage payments and an incentive to stick around.
“Preventing avoidable foreclosures is an essential ingredient for economic recovery. After proposing an OTS Foreclosure Prevention Proposal a year ago, agency leaders have been testifying on Capitol Hill about foreclosure prevention alternatives, discussing approaches with industry trade groups and working with other bank regulators to keep American families in their homes,” the OTS release stated.
The OTS controls more than 800 thrifts, including a number of community banks and larger entities such as ING, Citicorp, and Chevy Chase.
The agency has seen a number of its banks fail in recent months as a result of the ongoing mortgage crisis, including big players like Countrywide, Indymac, Wachovia, and Washington Mutual.
This latest move reveals the desperation and severity of the foreclosure epidemic, as an outright moratorium is far from ideal.
The Fed recently announced yet another interest rate hike, making borrowing more expensive and pushing the prospect of purchasing a new home out of reach for an even greater share of Americans. At the same time, inflation is easing and the economy is showing unanticipated strength, with strong employment numbers and greater than expected GDP. All this means one thing for current and prospective homeowners – they shouldn’t expect the Fed to begin lowering rates any time soon.
Though this would typically signal a time for panic across the residential real estate profession, those who can focus on servicing their clients with a mind for the future will be well positioned for whenever the economics for home buying become more favorable.
Double down on relationship building
High mortgage rates mean those on the margins of potential homeownership are moved one step further away from their goal. It also means those currently in homes — some of whom purchased or refinanced through the historical low interest rate period after the pandemic — are disincentivized to buy a new home at current rates. Furthermore, for those looking for their next home, higher interest rates effectively reduce their buying power, translating literally to fewer and fewer square feet, bedrooms and bathrooms.
Real estate teams may lament homeowners’ waning interest in buying (or selling) into this market. But there are things real estate pros can do to make productive use of the moment, and double down on relationship building with new and existing clientele.
Educate and update
Stay connected. One of the biggest mistakes real estate professionals can make, regardless of the market, is not staying in touch with clients. Real estate can be a transient profession with many newcomers flocking to the industry when times are good, and falling out when times are tough. Times are decidedly difficult right now, reducing deal flow and overall revenue potential. Many will see the moment worthy of a pullback in their efforts, focusing on clients with a greater, real or perceived, likelihood of being able to transact. That state of mind is an absolute mistake.
Provide clients with market updates. Sharing recent news and its practical implications with current and prospective clients is an excellent way to check in and ensure they have a strong understanding of what impact rate increases, strong economic numbers and more will have on their immediate transaction prospects. Whether buying or selling a home, real estate pros who help their client base to have a clear understanding of what is happening, why, and what impact it will have, take advantage of a unique trust building opportunity. They provide clients with extra reassurance that they are indeed receiving good counsel on their (eventual) property endeavors.
Track and report on falling prices. High mortgage rates hurt home buying and selling prospects. However, for some, higher interest rates can bring home prices down just enough to account for the added cost of a higher interest rate. In some scenarios, if a prospective buyer can carry a more expensive rate, they may secure a home at a lower price, and then aim to refinance when rates have improved.
Understanding and activating home equity. Hikes in interest rates also affect the price of revolving debt. Most, if not all, revolving credit moves with the prime rate; meaning, it just got even more expensive to carry a balance from one month to the next.
Real estate professionals can educate clients on the prospect of leveraging the equity they have in their current home to consolidate consumer debt through home equity based products like HELOCs, home equity loans or other home equity based products, that tend to have better terms than other forms of debt. Home-equity products also provide a path to financing home improvement projects that can raise the value of a home, while clients wait for the environment for putting a home on sale to improve.
Keep the door open. Financial situations are constantly in flux. Did a client recently get a new job? Did a relative pass away leaving them with a large inheritance? Did your clients just become empty nesters? New occurrences in life bring about different new ways to view possibilities. No one wants to buy a home for more money than they have to, but new circumstances can open the door to revisiting property aspirations that weren’t reasonable conversations just moments before. Keeping an open door to those who have new circumstances will help real estate pros adjust their approach for specific clients.
Unprecedented and unfamiliar economic cycles like the one we are in today provide a great deal of room to drop the ball or lose interest. Those real estate teams that refocus on the basics of building trust through credible counsel and insight will see more deeply engaged client prospects, and eventually, transactions that can keep the business afloat during a time when the entire industry is facing headwinds.
Jeff Levinsohn is CEO and Co-Founder of House Numbers, a service to help homeowners gain financial independence by understanding and optimizing their largest asset — their home.