“Most sellers in Las Vegas are willing to negotiate—anywhere from 5% to 10% off their list price,” said local Redfin Premier agent Fernanda Kriese. “Sellers are offering buyers money for mortgage-rate buydowns, along with other concessions. Homes listed below market value get multiple offers and are snatched up in two to four days, but homes … [Read more…]
American renters are fearful that their home-owning aspirations are increasingly getting out of reach, according to a recent survey by the real-estate platform Redfin, amid an environment of high home prices and elevated mortgage rates.
Almost 40 percent of the renters polled told surveyors they did not believe they would own a home of their own, up from 27 percent in a similar survey Redfin conducted in May and June. Part of the struggle for these Americans is that homes are beyond what they can afford. Securing a down payment can prove elusive, and high mortgage rates may discourage them from acquiring property.
Read more: How to Get a Mortgage in 2024
The Redfin survey sampled about 3,000 U.S. residents in February, and its analysis of renters’ expectations came from a 1,000 renters in the poll.
Mortgage rates in particular have stayed elevated over the past six months. After hitting a peak of 8 percent—the highest level since the turn of the century—mortgage rates declined to the mid-6 percent range at the end of the year and into 2024. In recent weeks, however, the cost of home loans have ticked up to above 7 percent, depressing activity in the mortgage market.
A “for rent” sign in front of a home in Miami on July 12, 2023. Renters increasingly see the dream of owning a home as beyond their reach, according to a Redfin survey. A “for rent” sign in front of a home in Miami on July 12, 2023. Renters increasingly see the dream of owning a home as beyond their reach, according to a Redfin survey. Joe Raedle/Getty Images
On April 11, the 30-year fixed rate rose to almost 7.4 percent, Mortgage News Daily reported, the highest levels since November 2023. The rise follows news that suggests borrowing costs may stay elevated for longer than economists initially anticipated.
High mortgage rates now mean that first-time buyers must earn about $76,000 to afford what the industry describes as a starter home, which is an 8 percent increase from a year ago and almost 100 percent higher than it was before the pandemic, Redfin said. It added that home prices have soared more than 40 percent since 2019, as buyers took advantage of low borrowing costs during the pandemic to acquire houses, increasing demand, escalating competition and pushing up prices.
Read more: Compare Top Mortgage Lenders
“Buying a home has become increasingly out of reach for many Americans due to the one-two punch of high home prices and high mortgage rates,” Redfin wrote.
Renters being unable to buy homes has in turn contributed to increased competition and price jumps in the rental market. The median asking rent is at $2,000 in the U.S., close to the record high it reached in 2022, Redfin said. Still, despite the elevated cost of rent, renting may be a more affordable option than homeownership.
“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now—especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Daryl Fairweather, Redfin’s chief economist. “While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting.”
To purchase a house, a buyer would need about $60,000 as a down payment for a home loan, an amount that is out of reach for many Americans.
Fairweather added, “The sheer expense of purchasing a home is causing the American Dream of homeownership to lose some of its shine.”
Uncommon Knowledge
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.
This week’s Afford Anything blog post is a well-balanced diet:
Robert Kiyosaki predicts a massive crash — [philosophical]
Sobering stats about the housing market — [analytical]
Secret strategies to save on seasonal shopping — [practical]
The Robert Who Cried Wolf
Famed investor Robert Kiyosaki, author of Rich Dad, Poor Dad, recently caused an internet stir by predicting “the start of the biggest crash in history.”
Of course he did.
Kiyosaki is constantly crying wolf. It’s good for (his) business.
Bad news travels faster than good news.
People who prioritize attention over truth will use that to their advantage. Kiyosaki is a shrewd businessman. He understands the profit potential in strategic pessimism.
But that’s bad news for his followers. Per the law of large numbers, it’s reasonable that some people have kept their cash on the sidelines, rather than investing in the markets, after heeding his warnings. And that has massive lifelong ramifications on their wealth and retirement.
Lesson: Beware of anyone who peddles *negativity bias* in order to stay relevant.
These economic fear-mongerers don’t hold accountability for their track record of wrong predictions.
Their followers are the ones who suffer.
This is why it’s critical to choose your mentors carefully — and it’s precisely why you should never blindly enroll in an online class that’s taught by some random person whose ideas you haven’t vetted.
If you’re curious how often Kiyosaki has made the wrong call, note that Stanford-trained data scientist Nick Maggiulli, our guest on Episode 375 of the Afford Anything podcast, shared this illustration on X:
Imagine if you stayed on the sidelines …
Pessimism has a visceral appeal. It’s evolutionarily advantageous to be hyper-aware of threats.
Our ancestors didn’t survive the jungle or savanna by appreciating the beautiful flowers. They survived by staying hyper-vigiliant of danger. This explains why negativity bias is so innate, so intrinsic. It’s a survival mechanism.
But in the modern developed world, pessimism keeps us overly conservative. We choose the “safe” major. We take the “steady” job. We tilt too heavily into conservative investments when we’re young, and we panic when our 401k’s start to decline. We avoid real estate investing and starting side businesses because these seem too risky.
Pessimism stifles innovation, entrepreneurship, and creativity. It locks us into mundane careers and middling investments as we muddle through risk-averse lives. In the end, we haven’t endured huge losses, but neither have we *embraced a shot* of winning.
As Episode 284 podcast guest Morgan Housel eloquently said:
“Pessimists get to be right. Optimists get to be rich.”
No, The Fed Lowering Interest Rates by 25 Basis Points Is Not Going to Flood the Market with New Housing Inventory 🙄
A little history lesson:
Once upon a time, in 2008, there was a Great Recession. It scared many investors and homebuilders, and they stopped making new homes.
In the decade that followed the Great Recession, new construction reached its lowest point since the 1960’s.
By 2019, the housing shortage amounted to 3.8 million units. This means there were 3.8 million more families and individuals who wanted a place to live — either to rent or buy — than there were homes available.
Then the pandemic struck. The prices of copper, lumber and other construction items shot through the roof (no pun intended). Builders had to raise home sale prices due to higher materials costs. Prices soared.
In 2020 and 2021, people across the internet cried, “Why are they charging so much more than the home is worth?!” — not realizing that “worth” is a function of the cost of labor + the cost of materials + the premium of scarcity.
And when supply is curtailed — as it was by 3.8 million units as of 2019 — there’s an ample scarcity premium.
Then inflation climbed. The Federal Reserve raised interest rates 11 times during their 2022-2023 cycle, resulting in a rapid escalation of mortgage rates.
This created a “lock-in effect” among existing homeowners. Nobody wants to trade a mortgage with a 3 percent fixed interest rate for an alternate mortgage with a 7 percent rate.
Existing homeowners with a mortgage have a huge incentive to hold.
Sellers who *need* to get rid of their property — for example, because they’re moving to another country — list their homes on the market. But homeowners who simply *want* to upsize or downsize are, for the most part, staying put.
This has created even more housing supply pressure.
Meanwhile, homebuilders — who must borrow money to finance their operations — are seeing the cost of capital skyrocket. Many have curtailed new construction, putting further pressure on the supply pipeline.
So we have a long-running confluence of factors that, piece by piece, keep exacerbating the housing supply crunch.
And this leads to today’s takeaway:
No, this problem will not magically solve itself the moment that the Fed reduces interest rates.
The Fed is meeting today and tomorrow. They’re widely expected to hold rates steady. (They’ll make an official announcement at 2 pm on Wednesday.)
There’s rampant speculation that the Fed will lower interest rates in Q1 or Q2 of next year.
— And —
There seems to be a pervasive myth that once interest rates decline, those “locked-in” homeowners will rush to list their homes for sale, flooding the market with new inventory.
The supply-demand imbalance will tilt in the buyer’s favor, home prices will plummet, and housing will become affordable once again.
Yet that is pure fantasy, disconnected from the data.
Imagine 10 people. Nine of them have mortgage rates that are less than 6 percent. The stat is 91.8 percent of mortgaged homeowners, to be precise.
Wait.
Imagine those same 9 people, the 9 out of 10 who have a sub-6 percent interest rate. Here’s how they break down:
One has an interest rate between 5 to 6 percent.
Two have an interest rate between 4 to 5 percent.
Six have an interest rate below 4 percent. The exact stat is 62 percent.
Let me say that again:
Six out of 10 mortgaged homeowners have an interest rate that’s below 4 percent.
Meanwhile:
One-half of mortgaged homeowners (49 percent) say they’d consider listing their home only if interest rates fell below 4 percent, according to a Redfin survey conducted by Qualtrics.
So this myth that if the Fed lowers interest rates, the market will get flooded with new inventory? — That scenario isn’t likely to happen for a long, long, looooong time.
As of Dec 12, 2023, the current average 30-year fixed rate for a buyer with a 740-760 credit score is 7.4 percent. Multiple reductions in interest rates won’t begin to approach the sub-4 percent rates of yesteryear.
The “lock-in effect” will last for longer than you might expect.
Lesson:Don’t wait to buy a home based on speculation about the market. If you have both the money and desire to buy a home, DO IT NOW. Homes are likely going to get more expensive in the future, not less.
How to Not Flush AS MUCH Money Down the Toilet This Holiday Season
Yeah, I know.
The holiday season is custom-built for parting with your money. Every store is promoting sales, discounts, offers. Limited time only.
It’s scarcity on steroids.
Holiday deals tap into the part of our brain that says — “this deal is only available now; I should snag it while I still can.”
Our FOMO creates jobs and drives the economy.
Since holiday spending is human nature, let’s forgo the guilting, shaming and finger-wagging that’s so endemic to the personal finance and FIRE community.
It’s counterproductive. Guilt and shame over holiday spending doesn’t change human behavior, it merely robs the joy from it.
It’s like chowing down a piece of chocolate cake while simultaneously fretting about the sugar.
You’re eating the cake regardless. You may as well enjoy it.
Instead, let’s accept that some degree of holiday spending is normal, and let’s focus on how to find the best deal possible.
Here are four pointers. (If you have more to add, please share these with the Afford Anything community) —
#1: If you’re buying an item at a mid-size company’s website (i.e., a merchant that’s bigger than a mom-and-pop shop, but not a big box retailer like Target or Amazon) — move your cursor near the “back” arrow on the browser.
This is called “exit intent,” and it often triggers pop-ups with discount codes.
#2: For online purchases: Create an account, put an item in your cart, and then leave the website.
This is called “abandoned cart,” and often triggers an automation in which the company emails you a limited-time-offer discount code.
#3: If you’re buying something expensive (over $500 – $1,000 or more), track the price for a few weeks, especially around the holidays. On sites like Wayfair, I’ve seen prices fluctuate daily.
#4: The least useful savings tip: Googling discount / promo codes or pulling these codes from mass aggregator websites.
You may get lucky, but typically 9/10 are expired or don’t work; they just yield a bunch of extra open tabs on your browser.
There’s an enormous selection of third-party websites and browser extensions that claim to help with this, with varying degrees of efficacy.
I’m not going to recommend any specific tools; recommendations are both dynamic and better crowdsourced. Please share your experience with the community.
A significant portion of the millennial generation now believes they will not have the opportunity to be a homeowner, indicating that mortgage originators may need to provide more education as part of their marketing.
Affordability remains the big hang-up, a Redfin survey found. But it’s not just millennials that are being impacted; besides the 18% of this cohort no longer thinks they will buy a house, 12% of the up-and-coming Gen Z, one already described as the largest and most diverse to enter the housing market, believe similarly.
First-time buyers already have a significant share of purchases this year, Zillow previously reported.
Breaking the list of affordability-related responses down further, high home prices, which have endured even as the U.S. economy has slowed, was the most cited reason why both groups felt this way.
A separate Redfin report issued on Thursday found that home prices gained 4.5% year-over-year for the four-week period ended Sept. 3.
As a result, the typical monthly mortgage payment of $2,612 is $18 below the all-time high set in May.
“If folks can figure out a way to buy instead of rent, they will,” Redfin agent Niko Voutsinas said in the home price release. “Some buyers are cutting back on other expenses to up their housing budgets because they believe home prices are only going to increase.”
Negative perceptions about their ability to save enough to make a down payment was cited by 46% of millennials and 33% of Gen Z. More than a third of both groups said mortgage rates are currently too high.
Meanwhile paying off student loan debt will take precedence for 21% of Gen Z and 16% of millennials over the purchase of a home, the survey found.
Of those survey participants that are planning to buy in the next 12 months, 36% of millennials and 41% of Gen Z members are working a second job in order to fund the down payment.
A cash gift from a family member is expected to help contribute to the down payment from 23% of millennials and 28% of Gen Zers.
Over 20% of both groups said they will tap into their investment portfolios by selling stock, while 15% will divest cryptocurrency.
“Many young people don’t have a choice between renting and buying,” said Daryl Fairweather, Redfin chief economist, in a press release. “They’re renting their home because even though rent payments have increased, too, it’s still more affordable than buying in much of the country–and renters don’t need a down payment.”
In turn, with private mortgage insurance, consumers can get a conforming loan with only 3% down. For first-time and other buyers, various forms of down payment assistance programs are available. Yet awareness of these alternatives has been lacking among the target audience.
“We’re very proud of the fact that we can enable people to buy a home with less than 20% down, we’ve been doing that for a long time,” Radian Group CEO Rick Thornberry said in an interview. “But it’s also something that we feel a strong corporate purpose to do, not just for the sake of volume, but to do it responsibly and sustainably from a borrower perspective.”
The Redfin survey was conducted in May and June; this portion of the study just concentrates on responses from 1,340 Gen Z and 1,973 millennial participants.
As of the end of the second quarter, it was cheaper for households to rent versus owning both on a nationwide basis and in 27 of the top 50 U.S. markets, a First American Financial analysis found.
But there’s no blanket answer to this challenge.
“Given current dynamics, more young households may choose to rent in the near term as the cost to own, excluding house price appreciation, has unequivocally increased,” a posting from First American Economist Ksenia Potapov said. “Yet, once you factor in house price appreciation, or depreciation in some markets, to the cost of homeownership, the decision to rent or buy will depend on local real estate market dynamics, which will determine if a home is likely to cost more or less in the near future.”
The conundrum about the housing market in general is recorded in Fannie Mae’s Home Purchase Sentiment Index for August, which at 66.9 is 0.1 higher than it was in July. Compared with August 2022, the HPSI was up 4.9 points.
“The overall HPSI is maintaining the low-level plateau set a few months back, and we don’t see much upside to the index in the near future, barring significant improvements to home affordability, which we also don’t expect,” Fannie Mae Chief Economist Doug Duncan said in a press release. “While renters are slightly more pessimistic than homeowners, for two years now a large majority of both groups have told us that it’s a bad time to buy a home, and they’ve continuously cited affordability concerns as the primary reason.”
Only 18% of those surveyed said August was a good month to buy a home, unchanged from July. But those that called it a good time to sell increased by two percentage points to 66%.
Ironically, the shares of respondents that believe rates will go up in the next year increased by 1 percentage point to 46%, while those that think they will move lower gained two percentage points to 18%.
That is because fewer respondents, 34% versus 38% in July, now think rates will remain unchanged.
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/
Interest in off-grid homes is growing among buyers who are wary of blackout events such as the incident in Texas in February that followed a severe winter storm.
The growing interest in self-powered homes has led some developers to go beyond energy saving features like solar panels, building even more protections into their properties.
“Houses can be built in much more efficient ways, so not just solar but they can have their own water treatment systems, other sources of electricity generation, and a number of other efficient ways to manage their utilities,” said Ben Keys, associate professor of real estate at the University of Pennsylvania’s Wharton School, in an interview with CNBC.
As a result of the storm in Texas, around 10 million people were left without power. Moreover, blackouts that have affected at least 50,000 people have risen by more than 60% in the U.S. since 2015, according to the Environmental Science & Technology journal. Homeowners are also concerned about climate change leading to a rise in the occurrence of wildfires and flooding. Last year in California, more than 10,000 buildings were destroyed by fires, causing over $10 billion worth of damage.
These events have led to demand for more resilient homes to be built, CNBC reported.
A Redfin survey last month backs that up, saying that climate change is becoming more of a factor in people’s homebuying decisions. In that survey, 74% of respondents said they would hesitate to buy a home in an area that’s at risk of climate change. And almost half of respondents who said they’re planning to sell said that natural disasters and extreme temperatures were one of the reasons behind that decision. The most likely age group to worry about natural disasters and extreme temperatures is those aged 35 to 44.
In response, a boutique home builder in California called Dvele is building smarter, more durable homes that feature solar panels, batteries and other elements that use less energy so they can operate off the grid for longer. The homes use technology to monitor their energy output and can help their occupants to identify ways to save more power. If the power is cut off for any reason, the homes will continue to operate normally for a period of time.
CoreLogic’s recent Catastrophe Report said that homes in California, Texas, Kansas, Oklahoma and Nebrask, and also along the Mississippi River and in the Atlantic and Gulf coastal areas are at most risk of being impacted by weather-related catastrophes.
Keys told CNBC that building more self-sufficient homes is no longer just popular with extremists. “I think we’re going to see more and more people looking for ways in which they can protect themselves as there are increased risks from storms, more utility disruptions, and more need for resiliency,” he said.
Even so, the costs of building more resilient homes are high, Keys said, which may slow down adoption of such technologies.
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]
Weâve heard it for years now â that itâs a sellerâs market. And itâs hard to argue that fact with home prices hitting new nominal highs in many states across the nation, month after month. If you’re a seller these days, it shouldnât take long to offload your home for a record price if you… Read More »Is It Really Such a Great Time to Sell a House?
The post Is It Really Such a Great Time to Sell a House? appeared first on The Truth About Mortgage.
Well, itâs been a stressful couple of weeks, and the way the stock market is swinging at the moment, it doesnât appear to be abating. Grab your Tums, buckle your seat belt, and hang on. Donât you love waking up to the Dow rising 400 points, only to check in after lunch and find that… Read More »Higher Mortgage Rates Likely to Have Little Effect on Housing Market
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Whether youâre an existing homeowner, or a desperately prospective one, you probably already know that the housing market is absolutely bonkers. The topics du jour are bidding wars, skyrocketing home prices, expensive lumber, and a lack of homes for sale. And it doesnât seem to be getting any better for those who wish to buy… Read More »The Housing Market Is Nuts, But Probably Has a Lot More Upside
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Home buyers in the U.S. are facing increasingly fierce bidding wars, but even as prices rise and competition heats up, theyâre not giving in. A new survey by the National Association of Home Builders last week found that around 40% of prospective home buyers have been unable to purchase one because they keep getting outbid, […]
The post Bidding wars heat up, but buyers are undeterred appeared first on RealtyBizNews: Real Estate News.