Signs of a Nascent Housing Market Recovery Emerge in November

 By Odeta Kushi

Key Points:

• Despite an increase in mortgage rates, leading indicators of sales point to a modest pickup in sales activity in November.
  
  
• Inventory turnover has steadily increased to reach 0.95 percent as of October 2024 —that’s 95 in every 10,000 existing homes for sale.
  
  
• The recent increase in inventory helps to coax some potential buyers off the sidelines because they have more options to choose from.

 

The seasonally adjusted annualized pace of existing-home sales in 2024 has remained below 4 million for five consecutive months, a statistical feat unmatched since the late 1990s. Put another way, the re-sale housing market hasn’t been this stagnant since Bill Clinton was president. 

Existing-home sales have struggled under the weight of higher mortgage rates and corresponding affordability challenges, coupled with a limited supply of homes for sale. For most potential buyers during this period, even if you find a home for sale, chances are you can’t afford it. However, November data brings some cautiously optimistic news. 

According to our Existing-Home Sales Outlook Report, existing-home sales are expected to increase 1.2 percent in November compared to one month ago. Other sources indicate a similarly positive trend. Average seasonally adjusted purchase mortgage applications, a leading indicator of future sales, increased nearly 3 percent compared with October. Pending home sales, another forward-looking indicator of sales based on contract signings, increased by 2 percent in the month of October. Because a home goes under contract a month or two before it is sold, pending home sales indicate a potential uptick in sales in November. These are positive signs during a month when mortgage rates moved higher. So, what could be driving the increase in activity?

 

“The journey back to a normal housing market should accelerate in 2025. You can’t buy what’s not for sale – but the shelves are starting to be restocked.”

More Inventory, More Sales

 

According to our analysis, the total inventory of existing homes for sale relative to the total number of households, or “inventory turnover,” has historically averaged about 2.2 percent – or 220 homes per 10,000 are on the market at any given time. In February 2022, existing-home inventory turnover hit a series low of 0.75 percent. Inventory turnover has steadily increased to 0.95 percent as of October 2024 -- that’s 95 of every 10,000 homes up for sale. New-home inventory has also increased during this time, bringing the total inventory for the housing market (new and existing combined) to 1.3 percent, which is still below the historical average of 2.5 percent but an improvement from earlier this year. From an affordability perspective, our First American Data & Analytics House Price Index(opens in a new tab/window) is showing that nominal house price appreciation has slowed alongside higher inventory levels. While inventory is far from “normal,” the progress is welcome news for potential home buyers and existing homeowners alike. 

 

 

Importantly, more supply gives potential buyers more choices. In the housing market, the seller and the buyer are, in many cases, the same – the existing homeowner. To buy a new home, you have to sell the home you already own, and then find a home to purchase. But, not just any home – one that you like better. The fewer homes there are for sale, the harder it becomes to find something better than what you already have.   

Sellers face a prisoner’s dilemma, a situation in which individuals don’t cooperate with each other, even though it seems in their best interest to do so. If sellers all chose to sell, they would all benefit as buyers because they would increase the inventory of homes available and alleviate the supply shortage. However, the risk of selling when others don’t in a market with a shortage of inventory keeps many existing homeowners from selling altogether. The recent increase in inventory helps to coax some homeowners to sell because they have more options to choose from as a buyer.

 

Is the Good News Here to Stay?

 

The last two years have been very challenging years in the housing market. The good news is that recent data indicates that the worst might be behind us. Inventory of existing and new homes has been trending higher, the consensus industry expectation is that mortgage rates will drift modestly lower next year, and there remains significant pent-up demand for homes from first-time home buyers and repeat buyers alike. Consider that the pre-pandemic, five-year average pace of existing-home sales was 5.4 million (SAAR). If you calculate the average annual pace of sales from 2022 through 2024, we’re cumulatively approximately 3 million sales short of the pre-pandemic normal – that’s a lot of missing sellers and buyers that are waiting to jump into the market. While the mortgage rate lock-in effect will prevent a full recovery, the journey back to a normal housing market should accelerate in 2025. You can’t buy what’s not for sale – but the shelves are starting to be restocked.

 

November 2024 Existing-Home Sales Outlook Highlights

For the month of November,  First American updated its Existing-Home Sales Outlook Report to show that:

• Existing-home sales for November are expected to increase 1.2 percent from October’s pace of sales, but decrease 1.6 percent compared with the predicted pace of sales a year ago.
  
  
• The largest contributors to the projected monthly increase in existing-home sales are an easing of the rate lock-in effect as measured by the lagged* spread between the prevailing market mortgage rate and the average rate for all outstanding mortgages (+0.6 percentage points), positive economic growth (+0.3 percentage points), and an easing of credit conditions (+0.2 percentage points).

*The spread is incorporated with a two-month lag in the Existing-Home Sales Outlook model.

 

Methodology

Our Existing-Home Sales Outlook Report ‘nowcasts(opens in a new tab/window)’ existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales, U.S. demographic trends, house-buying power, and the prevailing financial and economic conditions, as well as momentum, a weight assigned to past values. Please note that the Existing-Home Sales Outlook Report is based on assumptions about demographic, economic and financial conditions. Actual values may differ from those projected. Recent existing-home sales estimates are subject to revision to reflect the most up-to-date information available on the economy, housing market and financial conditions.

  First American Data & Analytics

Starter Home Prices See Largest Increase

 By Jennifer Warner

Florida starter home prices have jumped since 2018, with rising rates and investor competition making it more difficult for first-time buyers.

ORLANDO, Fla. — The deck is stacked against typical Floridians trying to get into their first home in today’s market. Price increases, high interest rates and competition from investors have edged people out of what is considered a starter home, changing the profile of a first-time home buyer significantly as a result.

How did we get here?

After the Great Financial Crisis in 2008, Florida’s home prices began recovering in 2012 and have made modest but steady gains over the next eight years. The median price for all property types in Florida in 2019, the last year before the pandemic upended the housing market, was $240,000. Between 2012 and 2019, home prices grew by 9%. Given how low prices were to start, that ending place was high relative to history but in line with affordable limits for many Floridians. Also, interest rates were stable and relatively low, putting the monthly payment for a typical mortgage under or around $1,000 per month for the median priced home.

Price increases for homes in Florida have undergone significant restructuring during and post-pandemic. In the four years since Covid hit, prices have continued to climb another 58% to a median sale price of $420,000 (as of 12/5/2024 using October 2024 numbers). Combine that with higher borrowing costs, and the typical payment for a median priced home exceeds $2,000 today — and that’s just principal and interest!

Price tier differences

We know there are nuances within price tiers that are important to consider, particularly when considering a way to enter the market. We took a look at sale prices for all property types, we created “starter home”, “mid-range home” and “higher-priced home” groups based on percentiles. For example, “starter homes” is the bottom 40%, mid-range homes is the middle 20%, and higher-priced homes is the top 40%

From 2018 through October 2024, the average price for a “starter home” has nearly doubled, increasing by 82%, going from $128,000 to $233,000 in under six years. This has pushed up the entry point for a first-time homebuyer significantly, making it more difficult to make the initial purchase of a home. Mid-range and higher–priced homes certainly moved up too, at 67% and 74% respectively. However, for those who already own a home, the immense equity gained during this time helps offset those increases when trading up.

Impact on first-time buyers

What this means is the barrier to entry has increased for first-time home buyers in Florida. Just coming up with a down payment is significantly harder now. A 5% down payment on a starter home in 2018 was $6,400, whereas the same percent down now translates to $11,650. Factor in interest rates that are nearly double what they were in 2018, and the purchasing power of today’s first-time buyer is greatly diminished. The result — fewer first-time homebuyers are in today’s market. According to the National Association of Realtors® (NAR), in 2023, first-time homebuyers in Florida made up just 20% of all buyers, compared to 32% nationwide.

Those who are able to buy look a lot different than first-time buyers of previous generations. According to NAR's 2024 Profile of Home Buyers and Sellers Report, they are older, wealthier and using different sources of income for both purchase and down payment. These buyers are increasingly using stocks as sources of down payment in addition to the Bank of Mom and Dad, as well as good old savings.

What’s a Realtor® to do?

This may mean re-thinking what a first-time buyer is and what they want. Since today's buyers often have more financial resources than previous generations, and starter homes are increasingly costly, consider showcasing "trade-up" properties as a first option. The price difference may be minimal compared to starter homes.

These buyers may be more established in their lives and careers. They may not have families but will likely have pets, so considering amenities that cater to the furry family members will be beneficial. Take some time to review demographic trends in your area, breaking down sales by price tier to get a sense of what is trading in your area, and chat with your peers about who is in the market today. Staying on top of trends (beyond counter material) will set you apart and help you get ahead of the continually changing world of real estate.

Jennifer Warner is an economist and Director of Economic Development

© 2024 Florida Realtors®

Real Estate Business Looking Positive in 2025

 Recent mortgage rate forecasts have been optimistic and some economists expect the number of homes sold to reach 5.4M this year, an increase of 14% YoY.

WASHINGTON — Affordability and inventory challenges in the real estate market have been continuous headwinds for professionals, but recent 2025 forecasts have been positive and could signal positive years to come.

Recent mortgage rate forecasts have been optimistic, and economists at Fannie Mae project the volume of home sales will rebound. Forecasts from Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors (NAR) expect the number of homes sold to be 5.4 million this year, a 14% increase year-over-year.

Additionally, following an election, the number of existing home sales rose nine times out of 11. Those real estate professionals that remain in the industry will see less competition, as NAR expects 124,000 Realtors to leave the business by the end of 2025, an 8% drop in the number of active Realtors.

Firms that leverage the latest technology advancements could harness greater efficiency and productivity. Tech-savvy agents can edit videos quicker, create engaging copy faster, and focus on what really matters.

The challenges of the last few years have helped agents be more prepared to answer questions about transactions, come back from disappointments and seek out new opportunities.

Source: Inman (11/14/24) Burgess, Jimmy

Copyright © 2024 SmithBucklin

Investor Home Purchases Plateau Across U.S.

 U.S. investor home purchases fell 2% year over year in the third quarter, a much smaller change than the swings of the last several years.

SEATTLE — Real estate investors purchased 2.3% fewer homes in the third quarter than they did a year earlier, according to a new report from the real estate brokerage Redfin. The small size of the change is notable because it comes after four years of huge swings driven by the wild pandemic-era housing market. For instance, investor purchases surged as much as 144% year over year in 2021, then dropped as much as 47% last year.

Investor home purchases have settled near pre-pandemic levels of around 50,000 per quarter, with typical seasonal ups and downs. Investors bought 49,380 homes in the third quarter, compared with 50,535 last year. By comparison, investors were buying nearly 100,000 homes per quarter during the 2021 homebuying frenzy.

In dollar terms, investors purchased $38.8 billion worth of homes in the third quarter. That’s up 3.4% from a year earlier, similar to the increase in home-sale prices over the same period.

In September, 8.3% of home listings were from investors, down marginally from 8.7% a year earlier but up slightly from the pre-pandemic share.

“Investors are finding a balance after several years of whiplash: They bought up homes at a frenzied pace in 2021 and the beginning of 2022, then quickly backed off when the housing market slowed as mortgage rates rose,” said Redfin Senior Economist Sheharyar Bokhari. “Now there’s a middle ground. It’s less appealing to buy homes to flip or rent out than it was at the start of the pandemic, when demand from both homebuyers and renters was robust. But it’s more appealing than it was last year, when soaring home prices and borrowing costs put a big damper on demand.”

There are a few key reasons investor activity is settling back to pre-pandemic levels:

• It’s harder for investors to buy homes, then sell them for a big profit than it was during the pandemic because home prices and loan costs are high. The typical home sold by an investor in October went for 55% more ($181,567) than the investor bought it for. That’s down from a 64% gain a year earlier. But interest rates are lower than a year ago and homebuying demand has improved a bit over the last few months. Investors who flip homes are still reaping bigger gains than they were before the pandemic, when homes bought by investors were selling for roughly 45% more. Just 7% of homes bought by investors sold for a loss in October; shortly before the pandemic, the norm was about 10%.
• A glut of new apartment supply hitting the market has put a lid on rent growth, meaning it’s less lucrative to buy a rental property than it was during the pandemic. But there is strong demand for rentals, largely because it’s hard for individuals to afford to buy a home. In fact, the number of renter households is growing three times faster than that of homeowner households. Rents have stabilized over the last year, but they’re still much higher than they were before the pandemic–and rents are rising quickly on the East Coast and in the Midwest.

Investors bought 16% of homes that sold in the third quarter, the lowest share in 4 years

Real estate investors purchased 15.9% of U.S. homes that sold in the third quarter. That’s the lowest share since the end of 2020, though it’s down just incrementally from 16.2% a year earlier.

Investors’ market share has fallen to near pre-pandemic levels: In the third quarters of both 2018 and 2019, investors bought roughly 14% of homes that sold.

Investor market share hit a record high of 20.9% at the start of 2022, when investors were taking advantage of low mortgage rates to buy up properties during the pandemic-driven moving boom. Market share is evening out now because the number of homes investors are buying has returned to around pre-pandemic levels.

Investor purchases are falling in Florida

While investor purchases are stabilizing nationwide, they are falling fast in some metros and rising quickly in others.

Investor purchases fell most in Fort Lauderdale where they declined 23.8% year over year. Next come Newark, NJ and Miami, which each posted 19.4% declines.

In Las Vegas, investor purchases rose 27.6% year over year in the third quarter–the biggest increase of any metro in this analysis. Next come Seattle, where investor purchases rose 21.8%, and San Jose, CA, where they rose 19.5%.

Investor purchases of condos fell 11.4% year over year

Investor purchases of condos fell 11.4% year over year during the third quarter, the biggest decline in a year. That’s compared to a 3.5% decline in purchases of townhouses, a 2.1% decline for multifamily properties, and a 0.5% uptick for single-family homes.

Investors bought far more single-family homes in the third quarter than any other property type. Single-family homes made up 69.9% of investor purchases, up from 68% a year earlier. Condos made up 18.2% of their purchases in the third quarter, down from 20.1% a year earlier. Townhouses made up 6.7% and multi-family properties made up 5.2%, both equal to the shares a year earlier.

In terms of market share, investors bought 16% of U.S. condos that sold in the third quarter, the lowest share in three years but down just marginally from 16.8% a year earlier. Investors bought 31.1% of multi-family properties that sold in the third quarter, 15.4% of single-family homes, and 14.9% of townhouses, all roughly unchanged year over year.

Other metro-level highlights

Investor market share: Q3 2024

• In Miami, investors bought 28.2% of all homes that sold in the third quarter, the biggest share of any metro in this analysis.
• Investors bought 7.8% of homes that sold in Providence, RI in the third quarter, the smallest share of the metros in this analysis.
• Investor market share increased most in Anaheim, CA, rising to 24.3% from 22.2%.
• Even though investors still have the highest market share in Miami, it has fallen the most from a year ago, dropping to 28.2% from 31.2%.

Investor capital gains: October 2024

• In Detroit, the typical home sold by an investor went for 135% more than they bought it for, the biggest gain among the metros in this analysis.
• The smallest capital gains were in Phoenix (32%), Las Vegas (34%) and Sacramento, CA (39%).
• In Milwaukee, the typical home sold by an investor went for 97% more than they bought it for, up from a 31% gain a year earlier. That’s the biggest gain among the metros Redfin analyzed.
• In roughly half of the metros in this analysis, investors’ median capital gain declined year over year. In Washington, D.C., the typical home sold by an investor went for a 45% premium, down from a 74% premium.

Redfin’s report is based on its analysis of county-level home purchase records across 39 of the most populous U.S. metropolitan areas going back through 2000. Redfin defines an investor as any institution or business that purchases residential real estate, meaning the report covers both institutional and mom-and-pop investors.

Source: Redfin

© 2024 Florida Realtors®

Family Ties, Costs Shape 2024 Moving Trends

 In 2024, 46% of Realtors’ clients moved to the South, 25% moved to the West, 18% moved to the Midwest and 11% moved to the Northeast.

WASHINGTON – In 2024, Realtors® reported that their recent clients chose to move to a specific area primarily to be closer to family and friends (30%) and to get more home for the money (21%), according to a new report from the National Association of Realtors®.

While available U.S. Census Bureau data provides information surrounding where and in what volumes Americans are moving, NAR's 2024 Migration Trends report analyzes the drivers and motivators of Realtors' clients who move to different areas nationwide to understand and measure why people are moving to certain areas. The report also breaks down regional differences by movers to the Midwest, Northeast, South and West.

U.S. Census Bureau data finds the top 20 states with the highest net migration in 2023 include Florida (372,870), Texas (315,301), North Carolina (126,712), South Carolina (91,853), Georgia (88,325), Tennessee (76,471), Arizona (57,814), Alabama (36,128), Oklahoma (31,967), Ohio (28,718), Indiana (22,468), Arkansas (22,202), Virginia (21,132), Idaho (20,053), Wisconsin (19,301), Colorado (19,167), Missouri (19,023), Kentucky (16,592), Washington (13,643) and Nevada (12,908).

Forty-six percent of Realtors’ clients moved to the South in 2024, followed by 25% to the West, 18% to the Midwest and 11% to the Northeast. Conversely, 33% of respondents' clients moved from the South, 30% from the West, 22% from the Midwest and 15% from the Northeast.

Movers to the West were driven more than others by getting more house for the money (24%), movers to the South were more driven than others by lower or more favorable tax rates (19%) and movers to the Northeast were more motivated than others to move closer to their job location (22%).

"It is no surprise that the Sun Belt states continue to attract movers within the U.S., but this report helps to highlight just how much the draw to be close to one's friends and family drives a relocation," said Jessica Lautz, NAR deputy chief economist and vice president of research. "Home buyers continue to seek areas where their support systems are around them."

After stating that being closer to family and friends (30%) and to get more home for the money (21%) were at the top among all reasons for choosing a specific area, the secondary reasons Realtors' recent clients cited for moving to a specific area include the area having lower or more favorable taxes (16%), it being a safer area with less crime (16%) and being closer to their work location (15%). When asked to identify the one primary reason for choosing to move to a specific area, the most common driver among Realtors' recent clients was to be closer to family and friends at 23%, followed by getting more house for the money (12%) and being closer to work (9%).

"Home buyers are placing a priority on getting more bang for their buck, looking to areas with not only more space within their home but also favorable taxes," said Lautz. "This migration flow will likely continue as retirees and remote workers relocate."

Realtors' recent clients generally moved to a similar type of area; however, those moving from central city/urban areas (41%) and resort areas (44%) most often moved to a suburban area.

In 2024, Realtors reported that 36% of their clients moved to a different state. However, the majority of Realtors' clients moved intrastate: 21% moved within the same city, 21% moved to a different city in the same area and 21% moved to a different area within their state. Those relocating to the South and West were most likely moving from a different state, while movers in the Northeast were most likely moving within the same state.

Consistent with general seasonal market trends, respondents' clients were most likely to have begun their home purchase transaction in June (21%), May (18%) or April (15%).

Among repeat buyers, 74% sold their previous residence when making their recent purchase, while 20% kept their previous residence as an investment, rental or vacation property. Repeat buyers who moved to the West and Northeast were more likely than others to keep their previous residence.

Of Realtors' recent clients, 94% made a permanent move to a new area, while 6% now split their time between their new and previous locations. Nearly one in five (18%) moved back to an area where they had previously lived, a trend more common in the Midwest (24%) and West (20%).

Realtors' recent clients are most likely to have chosen a specific home based on its outdoor space (42%), additional square footage (31%) and because it's in a quieter area (24%). Outdoor space was especially important to movers to the Midwest, while movers to the Northeast were particularly driven by the need for more square footage and a better work commute.

Job location did not play a role in the purchase decision for 43% of Realtors' recent clients, as they continue to work remotely, while job location did influence 37% of movers who work at least some of their time in the office. Movers to the West and South were most likely to report that job location did not play a role in their decision due to remote work.

Only 2% of Realtors' recent clients made their move due to a return-to-office in their jobs. This was slightly more common among movers to the Midwest at 4%.

Methodology

The 2024 Migration Trends survey was sent via email to a random sample of 143,514 Realtors nationwide in August 2024. The survey received 1,572 responses, 1,061 of which had represented a primary home purchase in 2024, for an overall response rate of 1.1%. The confidence interval at a 95% level of confidence is +/-3.0%. The regional breakdown used throughout the report is defined as follows: Midwest – Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, North Dakota, Nebraska, South Dakota and Wisconsin; Northeast – Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont; South – Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia; West – Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

© 2024 National Association of Realtors® (NAR)

Agents, Buyers and Sellers: Navigating HOA Rules

 By Melissa Dittmann Tracey

About 30% of the U.S. housing stock falls under an HOA. Agent should consider promoting an HOA with strong attributes in their property marketing.

CHICAGO – The number of homes that fall under a homeowners association is rapidly growing, and real estate professionals play an important role in educating their clients about the pros and cons of HOAs.

About 75.5 million Americans reside in a community that’s governed by a homeowners association, representing more than 30% of the U.S. housing stock, according to the Foundation for Community Association Research, an affiliate of the Community Associations Institute. Newer communities may be more likely to have an HOA: About 84% of newly built single-family homes sold in 2022 belonged to a homeowners association, according to Census Bureau data. Plus, the number of HOAs is expected to grow, with predictions from the foundation for more than 3,000 new associations in 2024 alone.

Community associations — which include homeowners and condo associations as well as housing co-ops — are self-governing organizations that create and enforce rules for a group of residents in a subdivision, community or residential building. These associations collect fees that go toward the upkeep of the neighborhood, services like trash collection or snow removal, and maintenance of common areas, such as walking trails, playgrounds and swimming pools.

Homes in communities with HOAs may command a 5% to 6% higher sale price than similar homes in communities without an HOA, according to data from the Cato Institute, a public policy research think tank. “Community associations work to maintain and enforce rules that protect the overall appearance and quality of the community,” says Dawn Bauman, chief strategy officer with the Community Associations Institute and the executive director of the Foundation for Community Association Research. “Well-maintained properties and common areas often lead to higher property values, as the neighborhood remains attractive to prospective buyers.” Community associations also can “foster a sense of community” through organized social events, neighborhood gatherings, volunteer opportunities and committee appointments.

But homeowners aren’t always satisfied living under HOA rules, which can be strict. This is an important consideration for consumers when shopping for a home.

Real estate professionals often find that the way an HOA operates can alter a prospective buyer’s opinion of a home. Therefore, listing agents may want to consider promoting an HOA with strong attributes in their property marketing. Listing agents also want to ensure home sellers are in compliance with HOA rules and current on fees to avoid potential closing delays.

Snapshot of homeowners associations

What is an HOA? An organization that governs a housing community composed of individual houses, townhouses, high-rises or condos. The HOA collects fees from homeowners to cover the costs of maintaining common areas and shared amenities and services as well as enforcing community rules for items such as exterior property upkeep.

Homeowners agree to abide by HOA rules or else …

They could face fines or have a lien placed on their property for noncompliance.

$291 — Average monthly HOA fee in the U.S.

$3,500 — Average annual HOA fee

3 states with the most homes under HOAs:

• California: 4.9 million (37% of all homes in the state)
• Florida: 3.9 million (45%)
• Texas: 2.1 million (20%)

Most common services provided by HOAs:

• Neighborhood landscaping
• Security
• Personal landscaping
• Sports and leisure amenities (e.g. pools)

Most common HOA violations:

• Landscaping-related issues
• Design changes to the exterior
• Fencing complaints
• Trash pickup violations

HOA rules and regulations

HOAs implement rules and regulations to protect a neighborhood or building’s property values, maintain a high standard of living and keep the community safe. However, the types of rules and how they’re enforced can vary drastically from association to association. Homeowners may find some rules overly restrictive, like limits on landscaping, rental use or number of pets per home.

But like it or not, homeowners who live in a community with an HOA must agree to abide by the rules; they can face financial penalties and even legal action for noncompliance. An HOA has the authority to place a lien on a home if the homeowner fails to comply with HOA rules or falls behind on their dues. In extreme cases, HOAs can even initiate a foreclosure.

So, reviewing HOA governing documents is important for homeowners and prospective buyers. HOA governing documents may consist of the following:

Covenants, conditions and restrictions: Consider CC&Rs to be the community’s constitution—a legal document that outlines the association’s obligations, including maintenance responsibilities, architectural standards and how common areas can be used. CC&Rs cover homeowner responsibilities and restrictions on property modifications. CC&Rs can be difficult to change, requiring a vote of the homeowners, who are members of the association.

Rules and regulations: These are rules for homeowners to abide by on a day-to-day basis, covering items like landscaping standards, noise levels, parking restrictions and pet policies. These can be changed more easily than CC&Rs, often with just a vote of the HOA board.

Bylaws: These provide operational guidance for how the organization will function, such as election rules, board member responsibilities and meeting protocols. The bylaws offer insight into how homeowners can participate in community decisions.

Articles of incorporation: This legal document establishes the association as a nonprofit corporation and must be filed with the state or local government where the HOA operates.

Plat: This is a line drawing filed in local land records that shows the physical layout of the community, identifying the location of individual units, common areas, roads and open spaces. It helps to clarify boundaries and property divisions.

Examples of common HOA rules

Elected HOA board members typically have the authority to adopt new rules for the community. Homeowners can attend board meetings and offer input.

Some of the most common HOA regulations will address:

• Landscaping, such as mowing expectations, weed control, acceptable plants or trees, and fertilizer or pesticide usage
• Home exteriors, such as limitations on paint colors, yard signs, fencing, deck or patio construction, sheds and mailboxes
• Decorations, such as holiday displays, lawn ornaments and flags
• Vehicles and parking, such as how many vehicles are allowed, types of vehicles permitted (e.g. RVs or commercial vehicles), street parking allowances and guest parking
• Pets, such as size, weight, breed, number per home and pet waste management
• Noise complaints, such as quiet hours and crowd size restrictions
• Home occupancy limits, such as the number of people who can reside in a property
• Trash pickup, such as when trash cans must be placed on the curb and removed
• Rental restrictions, such as policies on long- or short-term rentals
• Policies for common areas regarding crowd size, hours of operation, visitor policies, and code of conduct

Unenforceable HOA rules

More than 30% of homeowners nationwide say their HOA has too much power, and 10% say they want to sell their home because of their HOA, according to a 2024 survey conducted by Rocket Mortgage.

Some HOAs may overstep their authority, leading to homeowner complaints and even lawsuits. HOA rules do not supersede local, state or federal law. In order to have legal standing, HOA regulations must be adopted by the board and included within the association’s governing documents, and enforcement must comply with fair housing and other local, state and federal laws.

For example, an HOA cannot prevent a buyer from purchasing a home in the neighborhood because of the buyer’s race, sex, religion, familial status and other protected classes. Some states also ban discrimination based on sexual orientation and gender identity.

Further, an HOA cannot selectively enforce rules that target only specific individuals or groups of people. HOAs also cannot penalize a homeowner for a violation that isn’t explicitly outlines in the HOA rules or CC&Rs. HOAs must have supporting justification for any regulation violation.

HOAs are not allowed to ban satellite dishes and TV antennas due to the Federal Communications Commission’s Over-the-Air Reception Devices Rule. However, HOAs can limit the size or placement of a satellite dish.

It can be tricky to determine whether an HOA rule is legally unenforceable. These three “hot button” issues, for example, may depend on state laws:

• Political signs: HOA disputes over political signs on a homeowner’s property are common around election time. HOAs may try to impose limits on political signs, which could conflict with the First Amendment right to free speech. State and local laws may determine the extent to which HOAs can enforce such rules. For example, Texas and Arizona have laws that prevent HOAs from prohibiting political signs, although they can regulate how the signs are displayed. On the other hand, states like Kansas and Pennsylvania allow HOAs to prohibit political signs.
• Outdoor clotheslines: HOAs may seek to prevent homeowners from stringing their laundry outside to dry. However, states like Florida, Maryland and Colorado have “right to dry” laws that prevent HOAs from enacting such rules. Associations can still limit the size and location of clotheslines.
• Solar panels: Many HOAs regulate the installation of solar panel systems on homeowners’ roofs. Some HOAs ban them altogether while others restrict where and how they’re installed. A handful of states, including Michigan, Florida, Indiana and Minnesota, have enacted laws to protect a homeowner’s right to install solar panels. These laws, known as solar access laws or solar easements, prevent HOAs from banning solar panels. In most cases, HOAs can still place “reasonable restrictions,” such as requiring board approval and submitting project plans for review.

What real estate agents should know about HOA rules

Real estate professionals should encourage prospective home buyers to carefully consider what they’re buying into when they purchase a home in an HOA community. Experts offer best practices for agents when addressing HOA matters with clients:

• Disclose: Listing agents and buyer’s agents should disclose if a home is in an HOA community, as this is considered a “material fact” under the Realtor® Code of Ethics. Agents who are REALTORS® must ensure that buyers and sellers are aware of any facts that could affect their decision to buy, sell or lease, says Deanne Rymarowicz, senior counsel of legal affairs at the National Association of REALTORS®. During the due diligence period of a real estate transaction, if not before, real estate professionals should advise their buyer clients about the existence of a homeowners association and stress the importance of obtaining and reviewing HOA governing documents, she adds. Listing agents should ask their sellers if an HOA exists in their community, as certain information, like monthly or annual fees and shared amenities, can be included on the MLS.
• Don’t interpret: Agents should be careful not to engage in “unauthorized practice of law,” which violates Article 13 of the Realtor Code of Ethics. For example, agents should not interpret an HOA’s CC&Rs, bylaws or budget, Rymarowicz cautions. Instead, agents should advise their clients to consult an attorney with any questions. “As with anything contract-related, we must be cautious in responding to buyers or sellers, never giving the impression that any legal advice is being provided,” says Harry Disbrow Jr., a broker-associate with Coldwell Banker Riviera Realty in Little Egg Harbor, N.J. “We don’t make it a practice of reading the HOA docs for our buyers or sellers.”
• Be an information source: Real estate professionals can help clients gather HOA documentation and facilitate answers to their questions from sellers, the HOA board or HOA management company. Also, agents should make sure that HOA disclosures and information packets are delivered and received in a timely fashion, as some states allow buyers to terminate a purchase contract within a certain period. “It’s incumbent on agents to make sure the buyer is aware of any deadline to review information packets so they can make the right determination for them,” Rymarowicz says.

Tips for agents representing sellers

A listing agreement should include information about the existence of an HOA, which means listing agents should inquire about pertinent HOA details with their sellers.

Here are a few best practices for listing agents:

• Highlight on the MLS: Real estate professionals will want to collect basic HOA information to include on the MLS listing, such as assessment amounts and shared amenities and services, like security features, snow removal or trash services, if applicable. An MLS could contain specific HOA-related fields to complete when listing a home. An agent also may decide to highlight certain shared amenities (e.g. walking trails, swimming pools, playgrounds and fitness centers) as a selling point when marketing the home.
• Compile information packets: In some states, like California, home buyers must receive HOA governing documents prior to a home sale. However, “the seller should not be the source of the HOA documents but always the HOA,” Rymarowicz says. The seller may have older or incomplete information, and HOA rules may have changed. Home buyers may request some of the following HOA documents:

• • Governing documents, including the CC&Rs, bylaws, operating rules and articles of incorporation
  • Recent financial statements and reports, such as annual budgets, reserves, outstanding loans and certificates of insurance
  • HOA assessments that homeowners are required to pay, including a schedule of payments and any recent special assessments

• Verify sale details: Agents should encourage homeowners to check with their HOA to determine if there are any extra requirements prior to selling their home. For example, some HOAs may require:

• • Transfer fees. HOAs may add a transfer fee whenever ownership changes occur. The seller can negotiate the fee with the buyer or pay it at closing. The fee covers distributing new documents, amenity passes and administrative costs, among others.
  • Compliance or resale inspections. Some HOAs may require homeowners to schedule a compliance inspection with the HOA management company prior to moving out. This ensures the home currently complies with all of the community’s rules and regulations. An HOA could potentially delay a home sale if violations are found and not corrected promptly.
  • Paid up: Selling a home does not erase outstanding debts the seller may owe to the HOA. Sellers who have any unpaid fees may not be able to close on the sale until the debt is paid. HOAs can place a lien on a property for unpaid dues or fines, which could affect transferring the home’s title to the buyer.

Tips for agents representing buyers

When reviewing listings with home buyers, real estate agents will want to alert them if a home is part of an HOA. An addendum is often added to the purchase contract when an HOA is involved, and some states require that certain HOA documents or disclosures be provided to home buyers for their review within a certain time period prior to closing.

Here are a few best practices for buyer’s agents:

• Factor in HOA fees: Help home buyers understand what fees they will be required to pay the homeowners association and when they’re due. HOA fees are often collected monthly or quarterly. These fees could affect what buyers can afford. Also, HOAs may occasionally collect a one-time special assessment fee to cover any unexpected costs when reserve funds are inadequate. Home buyers may want to ask the HOA for details about any previous special assessments, including the amount and the purpose, suggests Bauman.
• Research the HOA: Buyers will be required to sign legal paperwork agreeing to follow the community’s rules, so it’s important to encourage them to review CC&Rs, bylaws and the rules and regulations. Home buyers also may want to gauge the financial health of the HOA. After all, lenders likely will scrutinize the association’s finances and deny a mortgage if they feel the HOA is on shaky financial ground. Home buyers can request to see the HOA’s latest reserve study, which could give them an overview of potential upcoming repairs and special assessments.

Questions to ask the HOA

The Foundation for Community Association Research offers the following questions that prospective home buyers can ask a community association to learn more about how they operate:

• How much are the assessments, and when are payments due?
• What do the assessments cover and not cover?
• What are my individual responsibilities as a homeowner?
• What procedures are in place to collect delinquent assessments?
• How often can assessments increase and by how much?
• Does the community have a healthy reserve to fund major, long-term maintenance and repairs?
• Are there restrictions on renting a property?
• Is the community age-restricted? If so, what’s the policy on underage residents?
• Are there any communication issues between homeowners and the elected board?
• What are the rules related to pets, flags, outside antennas, satellite dishes, solar panels, electrical vehicles, clotheslines, fences, patios, parking and home businesses?
• How often does the association communicate with residents?

Make sure they can live with it: Encourage buyers to carefully review the CC&Rs and pay attention to any restrictions that may affect their intended use of the property, such as rental restrictions, parking regulations and architectural guidelines. Some states, like Nevada, allow home buyers to cancel a purchase agreement within a specified period after reviewing HOA documents. “Buyers often have specific ideas of how they want to use a property, but they may not always share that with their agent,” Rymarowicz says. “Then, they later find out about a dog breed restriction by the HOA, fencing restriction, number of rental properties allowed or that they can’t even paint their front door a certain color. There are all kinds of factors or variables that a buyer may have on their mind. It’s incumbent on them that HOA documents meet their expectations and to make sure they can do what they want.”

Don’t overstep: “The buyer’s agent should not interpret any financial statements, bylaws or restrictions of the HOA,” Rymarowicz cautions. “It’s really up to the buyer to go through the documents and make sure they can live with the restrictions, that the amount of the assessment is OK and to make sure the association is not involved in any current litigation.” Always refer buyers to a real estate attorney for more guidance.

The last word on HOA rules

HOAs are growing rapidly across the U.S., and more homeowners are living under one. Community associations can be a selling point for a home, helping to protect property values, ensuring a community is well-maintained and preserving neighborhood aesthetics. But overly stringent HOAs can prove a nightmare for homeowners having to cope with endless rules and regulations that may prevent them from enjoying or using their home as they had intended.

HOAs are becoming a growing discussion point in real estate transactions, and real estate professionals should be prepared.

“Real estate agents can be a valuable information source for home buyers considering properties in community associations by helping them understand both the benefits and responsibilities of living in such communities,” Bauman says. “Agents can facilitate conversations with current residents, board members or community managers, who can provide insight into how the association is managed and what the community atmosphere is like. By addressing important questions about the assessments, amenities, architectural restrictions and overall governance, agents ensure that buyers make informed decisions and enter the community with realistic expectations.”

© 2024 National Association of Realtors® (NAR)

October Rents Fall, More Units Expected in 2025

 Growing supply of multifamily housing suggests a 1.1% increase in rental stock to more than 49 million units by next fall, with the biggest increases in the South and West.

SANTA CLARA, Calif. – Rents fell by -0.8% to $1,720 in October, marking their fifteenth consecutive month of year-over-year declines and falling the most for smaller-sized units, according to the Realtor.com’s October Rental Report. Looking ahead, new rental properties coming onto the market are expected to put continued downward pressure on rents next year.

"New multifamily construction projects started in the last two years have hit the market in 2024, with a greater supply of units helping to soften rents and bring renters some relief," said Danielle Hale, chief economist at Realtor.com. "While we expect fewer multifamily homes to be finished in 2025, we still anticipate enough to increase supply, which will keep downward pressure on rents."

Growing rental supply remains key for 2024 and 2025 rental market

More completed multi-family homes made their way to the market in 2024 as projects begun in 2022 and 2023 were finished. Between January and September 2024, the average seasonally adjusted annual rate of multi-family completions reached 606,000 units, up from 445,000 units in the same period in 2023, and higher than the 2017-19 pre-pandemic average of 359,000 units. While a lower rate of completions is anticipated for next year, rental housing stock is still expected to rise by 1.1% to more than 49 million units by fall 2025, which would be 6.7% higher than in the fall of 2019, before the pandemic.

Rental stock is expected to increase most in the South by fall 2025

New multifamily completions rose in all regions of the country this year, with the biggest year-over-year gains seen in the South (49.1%) followed by the Midwest (44.9%), West (23.9%) and Northeast (7.4%). That has translated to lower median asking rents. In the South, the biggest annual drops in median asking rent in October were seen in Memphis, Tenn. (-5.4%), and Nashville, Tenn. (-5.2%). In the Midwest, the biggest annual decline was in Chicago (-4.1%) and in the West, rent declines were led by Denver (-5.6%) and Phoenix (-4.5%). Large Northeastern metro areas, such as New York (0.4%), have seen small increases in rent due to relatively slower increases in the supply of new rental homes.

By fall 2025 rental stock is estimated to increase most in the South, with a 1.5% year-over-year increase, followed by the West (1.2%), Midwest (0.9%) and Northeast (0.7%). That will translate to increases in the overall rental stock by 8.9% in the South, 8.6% in the West, 5.0% in the Northeast and 1.7% in the Midwest compared to pre-pandemic levels.

Rents decline across all unit sizes

October saw the fifteenth straight month of year-over-year rent declines for 0-2 bedroom properties. The median asking rent fell by $14, or -0.8%, to $1,720. That's still just $40 (-2.3%) lower than its August 2022 peak and is $272 (18.8%) higher than the same time period in 2019.

All unit sizes saw rent declines in October, with the biggest drops in smaller-sized units. The median rent for studios fell -1.2% year-over-year, to $1,436. That's down -3.6% from its October 2022 peak but is 12.5% higher than five years ago. The median rent for one-bedroom units fell -0.9% to $1,600, 17.1% higher than five years ago. And the median rent for two-bedroom units fell -0.7% to $1,908, which is 21.1% higher than five years ago.

National Rental Data – October 2024

Florida Largest Metropolitan Areas – October 2024

Methodology

Rental data as of October 2024 for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the top 50 largest metropolitan areas. Realtor.com began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.

Source: Realtor.com

© 2024 Florida Realtors®