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Monday, October 4, 2021

Borrowers Withdrew $63 Billion in Equity in 2nd Quarter of 2021

 Black Knight: As a result of rising home values, the average homeowner could refinance their mortgage and withdraw $173,000, while keeping 20% equity in their home.

JACKSONVILLE, Fla. – Black Knight estimates that borrowers pulled $63 billion in equity in the second quarter of 2021, the most in a single quarter in almost 15 years. There remains $9 trillion in tappable equity, a 37% year-on-year gain, due to surging home prices.

Home values have soared to such a degree that the average homeowner could refinance their mortgage and withdraw $173,000, while keeping 20% equity in their home; the sum of such tappable equity rose $20,000 for the average homeowner from the previous quarter.

Homeowners’ equity will cushion homeowners exiting forbearance, according to Black Knight’s Ben Graboske. Ninety-eight percent of homeowners still in forbearance as of mid-August have at least 10% equity, while 28% of mortgage holders were fully underwater in the last downturn.

Although mortgage originations had fallen 5% from the first quarter, it was the fourth straight quarter to post over $1 trillion in total lending, and more than 2.2 million people opted to leverage rising home values and low rates and refinance their homes.

More than 50% of borrowers who exited their forbearance plans in April and May 2020 fully repaid their mortgages, likely due to low rates encouraging refinancing – but more borrowers who are now leaving forbearance are remaining in loss mitigation programs.

Source: HousingWire (09/08/21) Kromrei, Georgia

© Copyright 2021 INFORMATION, INC. Bethesda, MD (301) 215-4688

Rising Prices Push Home Equity to Its Highest Level in 10 Years

 By Alex Veiga

Homeowners with a mortgage gained an average $51,500 in home equity in the second quarter – a 29.3% year-to-year increase. It’s the biggest jump since 2Q 2010.

LOS ANGELES (AP) – Soaring home prices have pushed up average homeowner equity growth to the highest level in more than a decade, though recent signs of a cooling U.S. housing market point to more moderate gains in the second half of the year.

Homes with a mortgage gained an average of $51,500 in equity in the second quarter, an increase of 29.3% from the April-June quarter last year, according to real estate information company CoreLogic. That’s the highest quarterly average gain in home equity since the second quarter of 2010, the firm said.

That works out to nearly $3 trillion in equity gained by U.S. homeowners with a mortgage, which is about 63% of all homes, CoreLogic said. Average homeowner equity jumped nearly 20% in the first quarter from a year earlier.

Home equity growth can have broad impacts on the economy, giving homeowners more financial flexibility to spend on big purchases or build a nest egg. Rising home values also make it increasingly tougher for would-be homeowners to buy.

Homeowners in California, Washington state and Idaho saw among the biggest average equity increases in the second quarter: $116,000 in California, $103,000 in Washington state and $97,000 in Idaho.

The surge in homeowner equity gains follows a record run up in U.S. home prices this year amid a searing hot housing market fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic.

S&P said this week that its closely watched S&P CoreLogic Case-Shiller 20-city home price index surged 19.9% in July from a year earlier, the largest gain on records dating back to 2000.

Still, there are signs the soaring home price gains fueling homeowner equity may have peaked. The National Association of Realtors’ most recent housing market snapshot showed the median home price of previously occupied U.S. homes rose 14.9% in August from a year earlier to $356,700. That’s a more modest gain than earlier this year, when year-over-year increases were running at 20%-25%.

“It seems that there was that shift from July to August where there starts to be a little bit of pushback in terms of where prices have gone,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker.

Wolf projects that U.S. home price growth will slow to about 5% next year, citing expectations of modestly higher mortgage rates and a small but notable increase in the number of homes on the market.

“The days of runaway home price growth are behind us,” she said.

In its most recent quarterly housing forecast, mortgage buyer Freddie Mac envisions home prices growing 5.3% next year, down from a projected 12.1% increase in 2021.

If those home price outlooks hold, it would translate into a less torrid pace for homeowner equity growth next year. Still, the outsized growth in homeowner equity this year will have ripple effects for the broader economy, and the housing market. Rising homeowner equity creates a buffer for borrowers against potential financial hardship, such as job loss. And it can give homeowners financial flexibility to borrow against their equity to pay off high-interest debt or finance large purchases, such as home improvement projects, which can give a boost to the economy.

“It is good for wider economic growth, but there’s an ugly side to today’s level of pricing,” Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”

The surge in home prices this year has made it tougher for would-be homeowners to buy. First-time buyers accounted for 29% of home sales in August, according to the National Association of Realtors. A year ago they made up 33% of buyers.

The U.S. homeownership rate was 65.4% in the second quarter, down from 66.6% last year and 66.2% a decade ago.

The increase in home equity has helped limit the number of homeowners who end up “underwater” on their mortgage, or owing more on their loan than their home is worth. Also known as being in negative equity, that can happen when a home’s value declines, or when the size of the mortgage increases, say when someone takes out a home equity loan.

At the end of the second quarter, 1.2 million homes, or 2.3% of all U.S. homes with a mortgage, were in negative equity, CoreLogic said. That’s down 30% from the same quarter last year.

Among U.S. metropolitan areas, Chicago had the biggest share of homes with negative equity in the April-June quarter at 5.2%, the firm said.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Housing Affordability Hits Its Lowest Point in 13 Years

 When calculating affordability, low mortgage rates have offset rising home prices so far, but 75% of U.S. counties are now less affordable than their historical average.

MIAMI – According to ATTOM Data Solutions LLC, about 75% of counties across the country were less affordable than their historical average during the third quarter of 2021 – an increase from 56% of counties one year earlier (third quarter of 2020) and the worst rate since 2008.

ATTOM reports that 430 out of 572 counties analyzed in the third quarter of 2021 are less affordable than their past averages, up from 317 counties.

The rising lack of affordability comes as the median national home price shot up 18% over the last year to about $315,500. Major ownership costs on the typical home consumed 24.9% of the average national wage of $64,857 in the third quarter, up from 24.3% in the second quarter of 2021 and 22.3% in the third quarter of last year. Lenders generally consider 28% as a ceiling.

The report also found that total homeownership costs are only below 28% in 303 of the counties analyzed.

Home prices have been going up for 10 years, and in the third quarter of 2021, about 67% of counties saw year-over-year price increases of at least 10%. The biggest price increases among counties with at least 1 million people include Middlesex County, near Boston, where prices are up 32% over the same time last year, as well as Arizona’s Maricopa County, up 24%.

ATTOM found homeownership most affordable in three Pennsylvania counties: Schuylkill County at just 9.5%, Fayette County at 10.6%, and Cambria County at 10.9%.

Counties that require the highest share of wages to afford a home include Kings County in Brooklyn (78.7% of weekly wages), Santa Cruz County, California (77.7%), Marin County, California (75.1%), and Maui County, Hawaii (66.2%).

The quickly rising pace of home prices may be starting to even out, however, which may help affordability. In August 2021, about 46.1% of homes sold for more than their initial list price, down from 47.2% in July and from a June peak of 50.4%.

Source: South Florida Business Journal (09/30/21) Medici, Andy

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

Monday, September 27, 2021

Florida’s Housing Market: Median Prices, New Listings Up in August

 By Marla Martin

Florida Realtors’ data: More new listings and higher median prices – up 18% for single-family homes to $354,000; up 16.1% to $252,500 for condos – than a year ago. Single-family home sales rose just 0.2%, but condo sales were up 13.1%. Chief Economist O’Connor: Condo-townhouse market “remains the hotter market for now.”


ORLANDO, Fla. – Florida’s housing market reported higher median prices, more new listings and a rise in all-cash sales in August compared to a year ago, according to Florida Realtors® latest housing data.

“The data shows that new listings continue to increase, which is hopeful news for buyers who may have been waiting to see more for-sale inventory come on the market,” says 2021 Florida Realtors President Cheryl Lambert, broker-owner with Only Way Realty Citrus in Inverness. “New listings for single-family homes in August rose 10.6% year-over-year, while new listings for condo-townhouse properties increased 1.4%. Still, it’s likely to take some time before inventory levels rebuild.”

Closed sales of single-family homes statewide in August totaled 29,550, up slightly (0.2%) year-over-year, while existing condo-townhouse sales totaled 12,550, up 13.1% over August 2020. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

The statewide median sales price for single-family existing homes last month was $354,000, up 18% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $252,500, up 16.1% over August 2020. The median is the midpoint; half the homes sold for more, half for less.

Florida Realtors Chief Economist Dr. Brad O’Connor notes that while closed sales of single-family homes were up by only a fraction of a percentage point compared to a year ago, “that increase remains impressive given the rate at which homes were selling at this time last year. The market for condos and townhouses, however, remains the hotter market for now.”

In a continuing trend, the share of closed sales that were all-cash purchases rose last month compared to the previous year. In August, single-family existing home sales paid in all cash increased by 48.3% year-over-year, while all-cash sales of condo-townhouse units rose by 32.9%.

On the supply side of the market, inventory (active listings) remained constrained in August.

“Inventory levels at the end of August were not much different than they were at the end of July, but are still well below where they were a year ago,” Dr. O’Connor says. “Active listings (inventory) of single-family homes were down 32.4% year-over-year, while active listings of condos and townhouses were down 52.4%.”

Single-family existing homes continued at a very low 1.3-months’ supply in August, while condo-townhouse inventory was at a 1.7-months’ supply.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 2.84% in August 2021, down from the 2.94% averaged during the same month a year earlier.

To see the full statewide housing activity reports, go to Florida Realtors Tools and Resources. Realtors also have access to local market data (password protected) through Florida Realtors SunStats resource.

© 2021 Florida Realtors®

8 Experts: Sky-High Housing Prices Won’t Fall

 By Swapna Venugopal Ramaswamy

Today’s market isn’t like the boom-bust cycle leading up to the Great Recession: Tough loan standards are the norm, plus many factors have kept the housing supply low.

MCLEAN, Va. – Exuberant buying – with multiple offers and bidding wars – has become common across the country, reminiscent of the fevered market before the 2008 housing crash. Home prices nationwide increased year-over-year by 18% in July 2021, the largest annual growth that CoreLogic Home Price Index has measured in its 45-year history.

That leads to the inevitable question: Will history repeat itself?

USA TODAY spoke to eight experts to find out if a housing crash is on the horizon.

The short answer? No.

For one, they say the housing market in 2021 is not like the boom-bust cycle leading up to the Great Recession. In the years before 2008, mortgage lenders made subprime loans to borrowers without verified income or adequate down payments while pushing risky loan products. This time, tough loan underwriting standards are the norm even with rock-bottom interest rates.

On the supply side, a decade of underbuilding of homes, regulatory barriers, high construction costs combined with people staying longer in their homes have kept housing inventory low.

When it comes to demand, buyers’ desire for more space during the pandemic, low mortgage rates, rising savings, an improved labor market and millennials reaching their peak homebuying age have contributed to the tightening of the inventory.

But … home price growth will decelerate in the coming year, experts predict.

Stronger mortgage market

In the mortgage market of 2006, there was a proliferation of high credit risk mortgage products, while about one-third of all mortgages were low or no-documentation loans or subprime loans, says Frank Nothaft, chief economist for CoreLogic.

“It was a complete erosion and deterioration of credit underwriting standards in the economy, in the mortgage market,” he says. “The no-documentation loans were commonly referred to as liar loans because you’d lie about your income, you’d lie about your employment, you’d lie about your financial assets.”

This time around, it is completely different, he says.

“We have high-quality mortgage origination standards, and so we don’t have mortgage finance fueling home price growth today,” he said.

Forbearance programs

One of the lifelines for homeowners during the COVID-19 pandemic has been forbearance, an ability to skip or make smaller monthly payments on mortgages under the CARES Act.

That left homeowners with more cash for emergencies.

In May 2020, two months after the pandemic caused havoc in the economy, more than 4 million U.S. mortgages were in forbearance. Currently, there are an estimated 1.6 million homeowners in forbearance plans, which will start winding down by the end of September, according to the Mortgage Brokers Association.

Given the strong housing market and price appreciation, banks are more likely to work with borrowers to restructure their loans.

Those who are not able to make the payments might decide to sell their homes and enter the rental market, says Jeff Taylor, managing partner at Mphasis Digital Risk, a technology and risk firm that consults with mortgage lenders.

“We are currently guesstimating about probably 8% to 10% will actually have to go through the foreclosure process,” he says. “And it’s going to be geographically spread out so it will not have a big impact on the housing market.”

To put that in perspective, more than 11 million mortgages entered the foreclosure process between 2008 and 2012 – which included the Great Recession – according to the Federal Reserve Bank of St. Louis.

Two economies

“The pandemic caused much more economic damage to lower-wage earners than mid-and upper-tier salary types, who tend to be homeowners more than renters,” says Jonathan Miller, a state-certified real estate appraiser in New York and Connecticut.

With a rapid run-up in prices, homeowners have a record amount of equity at their disposal and, unlike the mid-2000s, are not leveraged to the hilt, Miller says.

“They’re not using equity like an ATM in their home – like they did during the bubble – because the economy is fundamentally better,” he says. “I anticipate more of a plateauing phenomenon,” with home prices, he says, rather than “some sort of sharp correction.”

Millennial homebuyers

The most significant housing demographic patch ever recorded in history – roughly 32.5 million people between ages 27 to 33 – will be actively trying to buy homes through 2024, according to housing analyst Logan Mohtashami.

“While I have been on record many times saying this housing cycle is the unhealthiest housing market post-2010, it’s not because we have a terrible credit boom. It’s because homeowners look great financially, they live in their homes longer than ever and the inventory shortage is creating forced bidding,” he says.

Indeed, homeowners nationwide are remaining in their homes longer than ever. In 2020, a typical homeowner lived 13 years in a home, up from 8.7 years in 2010, and 6.4 years in 2005, respectively, according to Redfin, a full-service real estate brokerage.

Not over-leveraged

The additional scrutiny of income and assets and the end of ‘silent seconds’ (a second mortgage placed on an asset for down payment funds that are not disclosed to the original mortgage lender) have been instrumental in establishing the ability to pay for home buyers, says Benjamin Keys, a professor of real estate in the Wharton School at the University of Pennsylvania.

“Default rates on mortgages were extremely low prior to the COVID programs put in place, and I expect that default rates will return to that level when the economy fully recovers,” he says.

Most of the growth in home prices is automatically addressed by lower mortgage rates and higher incomes, says Taylor Marr, lead economist for Redfin.

“The higher income includes all of the stimulus money that has gone out over the last year that allowed people to put a little bit more money down to cover the closing and moving cost,” Marr says.

Marr adds that he expects the strong demand to continue as more listings come on the market.

“It really will be just moving forward in a healthy direction where price growth is expected to slow down from double digits to single digits next year as mortgage rates rise,” he says. “But not so much where there’s a correction in prices.”

Still facing a housing shortage

An underbuilt market is one of the factors helping sustain valuation in the hot housing market.

An analysis by housing giant Freddie Mac suggests that the housing shortage has increased 52% from 2.5 million in 2018 to 3.8 million in 2020.

The decline in entry-level housing is even more pronounced than the overall shortage, it found. The share of entry-level homes in overall construction declined from 40% in the early 1980s to around 7% in 2019.

“A lack of supply rather than credit-driven speculation is driving house price growth,” says Leonard Kiefer, deputy chief economist at Freddie Mac. “House prices may be high, but there are some fundamental economic forces and not just speculation and very loose credit holding up the values.”

Even a price drop should not affect the housing market because of the pent-up demand and people who were priced out, says Lawrence Yun, chief economist for the National Association of Realtors.

“They’ll just jump back into the market, viewing it as a second opportunity,” he says. “We are still facing a housing shortage with inventory still down from one year ago and significantly down from two years ago.”

Why home price growth will slow

Most experts predict an increase in inventory heading into spring 2022.

Some of it will come from new construction, or from older homeowners who had postponed listing their home for sale the last two years because they didn’t want to sell and move during a pandemic, says Nothaft.

A segment of the population of borrowers who are in forbearance and are unable to make mortgage payments also are expected to sell their homes, he said.

“I don’t think that’s going to be a big number, but it will add to the inventory for sale,” says Nothaft.

Added to that, if mortgage rates go up next year, it could further erode affordability and reduce the number of prospective home buyers in the marketplace. “So between less demand and more supply, the price growth will slow down,” says Nothaft.

Copyright © 2021, USATODAY.com, USA TODAY

Wednesday, September 15, 2021

Borrowers withdrew $63 billion in home equity in second quarter of 2021

 SEPTEMBER 14, 2021

Borrowers Withdrew $63B in Equity in Q2

Black Knight: As a result of rising home values, the average homeowner could refinance their mortgage and withdraw $173,000, while keeping 20% equity in their home.

JACKSONVILLE, Fla. – Black Knight estimates that borrowers pulled $63 billion in equity in the second quarter of 2021, the most in a single quarter in almost 15 years. There remains $9 trillion in tappable equity, a 37% year-on-year gain, due to surging home prices.

Home values have soared to such a degree that the average homeowner could refinance their mortgage and withdraw $173,000, while keeping 20% equity in their home; the sum of such tappable equity rose $20,000 for the average homeowner from the previous quarter.

Homeowners’ equity will cushion homeowners exiting forbearance, according to Black Knight’s Ben Graboske. Ninety-eight percent of homeowners still in forbearance as of mid-August have at least 10% equity, while 28% of mortgage holders were fully underwater in the last downturn.

Although mortgage originations had fallen 5% from the first quarter, it was the fourth straight quarter to post over $1 trillion in total lending, and more than 2.2 million people opted to leverage rising home values and low rates and refinance their homes.

More than 50% of borrowers who exited their forbearance plans in April and May 2020 fully repaid their mortgages, likely due to low rates encouraging refinancing – but more borrowers who are now leaving forbearance are remaining in loss mitigation programs.

Source: HousingWire (09/08/21) Kromrei, Georgia

© Copyright 2021 INFORMATION, INC. Bethesda, MD (301) 215-4688

Monday, September 13, 2021

Fed: Median-Income Buyers Can’t Afford Median-Priced Homes

 By Domonic Purviance

Atlanta Fed: The affordability index hit 92.2 – and any number below 100 means housing is generally unaffordable. If interest rates rise, that number will probably go lower.

ATLANTA – The latest reading of a Federal Reserve Bank of Atlanta measure and U.S. housing trends shows that homeownership is becoming out of reach for many buyers, and resistance to higher prices is building. More than 80% of U.S. metro areas had a drop in affordability.

National affordability

With a 92.2 rating in June, the Federal Reserve Bank of Atlanta’s Home Ownership Affordability Monitor (HOAM) index fell to its lowest level since 2008. The index fell below 100 in March and has remained there, and a reading below 100 indicates that a median-income household can no longer afford to own a median-priced home on the market.

Over the past year, the index shows that U.S. homeownership affordability dropped by 11.9% as prices soared. In June, median existing home sale prices rose above a record $340,000 (three-month moving average), according to data provider CoreLogic. This valuation represents a 23.8% increase over the past 12 months – one of the highest year-over-year price gains on record.

Even with relatively low 30-year fixed interest rates (2.87% in August), a median-income household would spend 32.6% of its annual income to own a median-priced home, which is above the 30% affordability threshold set by the U.S. Department of Housing and Urban Development.

Following the onset of the pandemic in March and April 2020, declining mortgage interest rates became the primary catalyst for a surge in housing demand. Although home sale prices began to rise during the pandemic, lower rates were more than enough to offset the higher cost burden for consumers. In addition, greater income growth as the economy emerged from COVID-19-related shutdowns helped maintain affordability as prices rose.

However, this trend began to shift in 2021, when sale prices reached peak levels and low-interest rates and higher incomes could no longer offset the increased cost. As a result, homeownership affordability began to weaken significantly.

Regional affordability

Markets in Ohio and Pennsylvania dominated the 10 most affordable metro areas. To a large degree, they have seen relatively modest growth in home sale prices. For example, in the Youngstown-Warren-Boardman metro area – the nation’s most affordable large metro, according to HOAM – the median home sales price ($138,875 in June) remained flat from the year earlier, while prices nationally increased by more than 20%. As a result, a median-income household in Youngstown would spend only 19% of its annual income ($49,258) to own a median-priced home, the lowest homeownership cost among the nation’s largest metros (population greater than 500,000).

Eight of the country’s 10 least affordable markets were in California. Historically, markets in northern California (San Francisco-Oakland-Hayward and San Jose-Sunnyvale-Santa Clara) and southern California (Los Angeles-Long Beach-Anaheim and San Diego-Carlsbad) have been among the most expensive large metros in the nation. Although home sales price growth in these areas has not kept pace with national trends, rising prices have been a culprit in eroding affordability.

In San Francisco, for example, home prices rose by 7% over the past year, well below the national rise of 23.8%. However, with median home sale prices reaching a record $1.3 million, a median-income household in San Francisco ($118,036) would end up spending 61.5% of its income on a median-priced home in the area. It should be noted that, in most cases, households that earn just the median income in a high-cost market like San Francisco would most likely rent rather than own because of the lack of affordable ownership options.

In the region supervised by the Atlanta Fed, which includes Florida, Georgia, Alabama, and parts of Mississippi, Louisiana, and Tennessee, homeownership affordability tends to be much higher thanks to relatively low home sale prices in the region.

However, markets in South Florida, such as Miami and Naples, remained the least affordable. Additionally, as prices have risen across the state of Florida, markets that were previously affordable, according to the HOAM index – including Deltona-Daytona Beach-Ormond Beach and North Port-Sarasota-Bradenton – shifted to unaffordable in June. Elsewhere, college towns like Athens, Georgia, home to the University of Georgia, and Gainesville, Florida, the location of the University of Florida, also were among the District’s least affordable markets.

About 82% of metro areas had a decline in affordability over the past year. The deterioration was so widespread that only five large metros showed an increase in affordability. In addition to Youngstown, other areas that became more affordable were Baltimore-Columbia-Towson, Maryland; Jackson, Mississippi; Syracuse, New York; and Pittsburgh. For the most part, growth in home sale prices in these markets was not enough to offset the benefit from low interest rates.

On the other hand, sharp rises in home sales prices in markets like Boise City, Idaho; Phoenix-Mesa-Scottsdale, Arizona; and Austin-Round Rock, Texas, led to significant year-over-year decreases in affordability in June. Affordability declined in these metros by 21.4, 16.2, and 16%, respectively. At the same time, the median price of homes that sold in all three of these metros rose more than 25% over the past year, exceeding the national rate.

In most cases, markets with the sharpest decline in affordability had an influx of homebuyers moving from higher-cost markets over the past year. Boise City, for example, was the landing spot for a surge of buyers relocating from coastal California, which drove up home sale prices by 35% over the past year. Many of these buyers, having recently sold or cashed out equity on an existing house, tend to have large sums of cash to put toward a new purchase.

The increase in remote work since the start of the pandemic also gave greater flexibility to homebuyers in choosing where to live, helping to accelerate relocations from higher-cost markets to lower-cost markets. In many cases, buyers with higher incomes and more cash on hand moving from high-cost markets also have been able to pay more for homes than many local consumers in the areas in which they relocate. These trends have priced many local homebuyers out of the market in cities such as Boise City, Phoenix, and Austin.

National housing market roundup

Here’s a look at recent trends with important housing sector indicators.

  • Home Price Appreciation: The median existing-home price (above $340,000) reached a record level in June 2021 (see chart). At 23.8%, the current level of appreciation is the highest on record since 2005, when values jumped by 14.5%. Meanwhile, the share of metro areas that have experienced double-digit rates of appreciation remains high at 61%.
  • Home Sales and Inventory: During the past year, housing inventory has consistently trailed demand. According to the National Association of Realtors, sales over the past year increased 1.5% while existing home inventory fell 12%. As a result, the national supply of existing home inventory (months it would take to sell the current amount of inventory on the market given the current rate of sales) has been consistently below four months since June 2020. (Note: Anything less than four months is considered a supply shortage.)

    Existing home inventory reached its lowest point in January, when the supply dropped to 2.1 months. As of July, inventory remained low at 2.6 months. Meanwhile, there are growing signs that demand is softening given the tepid 1.5% sales rise in July following increases in double-digit percentages through most of last year and the first half of 2021. The slower pace of home sales is partly due to the of lack of affordable units available as well as concerns about price growth.
  • Construction Activity: Impaired by capacity constraints through most of the pandemic, new home construction has not been able to keep pace with demand. The amount of finished new homes available for sale (or finished vacant inventory) has steadily declined over the past year and ended the second quarter of 2021 at a low supply of 1.1 months, below the supply norm of 2 to 2.5 months since 2013.

    At the same time, new home builders continue to contend with rising costs. Though lumber prices are down from peak levels, labor, land, and other material costs continue to rise. After some builders worked to slow the pace of sales earlier this year to keep ahead of rising costs, many are now moving to resume more normal sales activity.
  • New Home Starts: Additionally, new home starts rose 23.1% in the second quarter over last year as builders ramped up construction activity back to more normalized levels. However, with affordability becoming more of a concern for buyers, some builders are seeing greater resistance to higher prices.
  • Mortgage Rates and Underwriting: According to Freddie Mac, 30-year fixed mortgage rates stood at 2.87% on August 12, up from a historic low of 2.65% in early January but still near all-time lows.

    A Federal Reserve survey of senior loan officers in July found that, on net, banks reported that they are easing underwriting standards on most mortgage types. However, more easing was reported with single-family jumbo mortgages (mortgages that exceed GSE loan-servicing limits, currently $548,250 for single-family homes in all states, except for areas designated as high-cost markets, where the limit is $822,375). The relaxation of underwriting standards for higher-end mortgages corresponds with the dwindling supply of affordable homes for sale.

    At the same time, Fannie Mae’s Home Purchase Sentiment Index (HPSI) fell by 3.9% in July as buyers expressed increased concern over higher home prices and the lack of inventory.
  • Mortgage Delinquencies: While delinquencies remain above pre-pandemic levels, conditions are improving as more and more borrowers return to making payments. Overall, delinquencies dropped to 5.8% from a peak of 9.2% last year. In the region covered by the Atlanta Fed, delinquencies are slightly higher at 6.7%.

    Since the high point in delinquencies last year, mortgages have steadily rolled off forbearance plans and lenders have reported that most borrowers have resumed payments as expected. As plans continue to expire, it remains to be seen if this performance will continue. For now, federal forbearance guidelines, coupled with favorable home equity positions, have helped stave off a wave of foreclosures.

    Still, the Consumer Financial Protection Bureau (CFPB) recently warned mortgage servicers to dedicate sufficient resources and staff to prepare for a surge in borrowers who will need help when federal emergency mortgage protections lapse this summer and fall. The CFPB is seeking comment on a proposal that would generally prohibit servicers from starting foreclosure proceedings until after Dec. 31, 2021.

© 2021 Targeted News Service

Most At-Risk Owners Have Enough Equity to Avoid Foreclosure

 By Kerry Smith

Foreclosure listings will likely only come from owners in trouble before the pandemic because the amount of equity owners can access has risen 40% year-to-year. Of U.S. homeowners in forbearance, 98% have at least 10% home equity; during the Great Recession it was only 40%.

JACKSONVILLE, Fla. – According to Jacksonville-based Black Knight Inc.’s July 2021 Mortgage Monitor Report, homeowners “tappable equity” – the amount over a base 20% equity that they’re about to take out – has soared over the past year.

According to Black Knight Data & Analytics President Ben Graboske, continued heat in the housing market drove Americans’ tappable equity to never-before-seen levels in the second quarter of 2021.

“Tappable equity grew an astonishing 37% year-over-year in Q2 2021, driven by increasing gains in home values over the quarter,” says Graboske. “As of the end of June, home values had risen nearly 20% from the year before and 7.4% in Q2 alone. As a result … homeowners with mortgages gained another $1 trillion in tappable equity in the second quarter alone. This is by far the strongest growth we’ve ever seen and equates to some $173,000 in equity available to the average mortgage holder, a $20,000 increase in just three months.”

While frustrated homebuyers may be hoping that owners currently in forbearance will have to sell or go through foreclosure once their forbearance period ends, Graboske says about 98% of homeowners in forbearance have at least 10% equity.

“Even when we add in 18 months of forborne payments – including principal, interest taxes and insurance – the share with less than 10% equity only climbs to 7%, or about 135,000 homeowners,” says Graboske. “This is a drastically different dynamic than during the worst of the Great Recession, when more than 40% of all mortgage holders had less than 10% equity and 28% were fully underwater.”

Black Knight’s report also suggests that current homeowners might also be less hesitant to tap their stores of available equity. Q2 2021 marked the fourth consecutive quarter with over $1 trillion in originations, and the fifth consecutive quarter with at least 2.2 million refinances.

© 2021 Florida Realtors®

Wednesday, September 8, 2021

Broward Real Estate Continues Trend of Surging Sales; Condo Transactions Up 51% Year-over-Year in July 2021

MIAMI — Broward County continued its long streak of surging home sales as pent-up demand, more U.S. individuals and companies moving to South Florida, and record-low mortgage rates continue fueling transactions, according to the MIAMI Association of Realtors (MIAMI) and the Multiple Listing Service (MLS) system.

 Broward County's total home sales surged 23.9% year-over-year in July 2021, from 2,970 sales to 3,679. Broward single-family home transactions rose 2.1%, from 1,646 to 1,680. Broward's existing condo sales increased 51%, from 1,324 to 1,999.

“Greater Fort Lauderdale and Broward County continue to attract tax-burdened homebuyers and relocating U.S. companies,” Broward-MIAMI President Patrick Simm said. “The allure of our low-tax, pro-government and sunny lifestyle has only accelerated with the pandemic and the increase availability of remote work.”

 Broward home sales are also higher vs. July 2019. Broward's total home sales are up 15.7% in July 2021 vs. July 2019, from 3,181 to 3,679. Broward single-family home sales (2.8% increase) and condo transactions (29.2% jump) are higher than July 2019.

 Demand for Broward Condos Surges; Condo Sales Jump 51% Year-over-Year in July 2021

With so many U.S. companies and individuals relocating to our region over the last year, many of those relocating homebuyers are acting on the condo inventory. International homebuyers, who have long preferred condos, have pent-up demand for South Florida real estate and are also returning to the No. 1 market for foreign homebuyers.

Broward existing condo sales are up in all price ranges in July 2021, with major transaction increases in properties selling at $300K and above.

 Lack of inventory in certain price points is impacting sales, particularly for single-family homes. Increased housing starts and more sellers listing properties in 2021 should help alleviate the lack of supply. More inventory is expected to come to the market later this year as potential home sellers become more comfortable listing and showing their homes. The falling number of homeowners in mortgage forbearance will also bring about more inventory.

 Broward Luxury Sales Jump as Northeast and West Coast Buyers Move to Mega Region

Broward single-family luxury ($1-million-and-up) transactions jumped 103.5% year-over-year to 173 sales in July 2021. Broward existing condo luxury ($1-million-and-up) sales increased 60.6% year-over-year to 53 transactions.

There are 3.8 months of supply in luxury single-family homes; 6.6 months of supply in luxury condos. Luxury months of supply continues to trend downward for all property types, month-over-month, and year-over-year.

 Low interest rates; a robust S&P 500; the appeal of stable assets in a volatile economy; homebuyers leaving tax-burdened Northeastern states to purchase in Florida (no state income tax); and work-from-home and remote-learning policies have all combined to create a robust market for luxury single-family properties.

 With global vaccinations rising and unstable political situations around the world, South Florida is seeing an increase in foreign homebuyers. Global buyers are also coming here for the vaccine and purchasing property. Global buyers purchase in South Florida because the mega region is a world-class global region with better real estate prices than other similar global cities. Foreign buyers feel at home with our incredible diversity and acceptance of all cultures.

 Broward single-family homes priced between $400K to $600K increased 11.8% year-over-year to 586 transactions in July 2021. Broward existing condo sales priced between $400K to $600K increased 163.2% to 200 transactions.

 Single-Family Home Inventory Rises Month-over-Month as More Listings Arrive to the Market

Broward single-family homes inventory rose in July 2021 compared to June 2021 and new single-family listings rose year-over-year, two indicators that more inventory is heading to the low-supply/high demand market.

 The number of Broward single-family home active listings increased 5.7% in July 2021 compared to June 2021, from 2,284 to 2,414. For single-family homes, new listings increased 2.5% year-over-year, from 1,921 to 1,969.

 Inventory of single-family homes decreased 35.2% year-over-year in July 2021 from 3,724 active listings last year to 2,414 last month. Condominium inventory decreased 51% year-over-year to 3,898 from 7,950 listings during the same period in 2020.

Months supply of inventory for single-family homes decreased 66.7% to 2.2 months, which indicates a seller’s market. Inventory for existing condominiums decreased 51.6% to 1.5 months, which indicates a seller’s market. A balanced market between buyers and sellers offers between six- and nine-months supply.

 Months supply of inventory is down since July 2019 for single-family, reflecting strong demand.

Total active listings at the end of July 2021 decreased 45.9% year-over-year, from 11,674 to 6,312.

 New listings of Broward single-family homes increased 2.5% to 1,969 from 1,921. New listings of condominiums decreased 4.8%, from 2,119 to 2,017.

 Nationally, total housing inventory at the end of July totaled 1.32 million units, up 7.3% from June’s supply and down 12.0% from one year ago (1.50 million). Unsold inventory sits at a 2.6-month supply at the present sales pace, up slightly from the 2.5-month figure recorded in June but down from 3.1 months in July 2020.

 Broward Homeowners’ Home Equity Surges as Many Pay Lower Mortgage Payments

With interest rates still at record lows, many South Florida homeowners have refinanced their home loans. So not only are many homeowners paying lower mortgage payments today; they are doing so while their wealth (home equity) has significantly increased. Home equity can be tapped for renovations, college loans and more.

 Broward County single-family median prices increased 23.8% year-over-year in July 2021, increasing from $400,000 to $495,000. Existing condo median prices increased 10.3% year-over-year, from $195,000 to $215,000.

 The greater share of Broward luxury sales in 2021 compared to a year ago is part of the reason for the large year-over-year increase in median prices.

 Rising median prices is a trend nationwide as record-low mortgages rates and the increased availability of remote work and education has accelerated the demand for housing. Low inventory relative to high demand leads to prices rising.

 Lower mortgage rates are making home purchases more affordable. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 2.87% in July, marginally down from 2.98% in June. The average commitment rate across all of 2020 was 3.11%. NAR Chief Economist Lawrence Yun expects the 30-year fixed-rate mortgage to remain below 3.5% in 2021.

 Should mortgage rates resume their upward climb, home price growth is likely to slow in response. As more sellers list properties in 2021, the increased inventory should ease the growth of median prices.

 Broward Dollar Volume Totals $1.6 Billion, Showcasing Power of Housing

While other industries struggled over the past year, housing lifted the economy nationally and locally. For every two homes sold in the U.S., one job is created. Miami dollar volume showcases the impact housing plays in the local economy.

Single-family home dollar volume increased 33.4% year-over-year, from $841.3 million to $1.1 billion. Condo dollar volume increased 72.1% year-over-year, from $339.6 million to $584.3 million.

Lack of access to mortgage loans continues to inhibit further growth of the existing condominium market. Only 19 of the 1,929 condominium buildings in Miami-Dade, Broward and Palm Beach counties are approved for Federal Housing Administration loans as of Aug. 17, 2021, according to the U.S. Department of Housing and Urban Development.

 A better condo approval process is expected to increase sales. The guidance, which went into effect in October 2019, extends certifications from two years to three, allows for single-unit mortgage approvals, provides more flexibility with owner/occupancy ratios, and increases the allowable number of FHA loans in a single project. The changes, many of which MIAMI and NAR have championed, are expected to generate increased homeownership opportunities.

 Broward Distressed Sales Keep Dropping, Reflecting Healthy Market

Only 0.9% of all closed residential sales in Broward were distressed last month, including REO (bank-owned properties) and short sales, compared to 2.9% in July 2020.

 Total Broward distressed sales decreased 58.8% year-over-year in July 2021, from 85 to 35.

Short sales and REOs accounted for 0.5% and 0.5% year-over-year, respectively, of total Broward sales in July 2021. Short sale transactions decreased 5.6% year-over-year while REOs decreased 73.1%.

Nationally, distressed sales represented less than 1% of sales in July 2021, equal to July 2020.

 National, State Housing Demand Robust as More Inventory Expected to Arrive

Nationally, total existing-home sales transactions completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.0% from June to a seasonally adjusted annual rate of 5.99 million in July. Sales inched up year-over-year, increasing 1.5% from a year ago (5.90 million in July 2020).

 Statewide, closed sales of single-family homes in July totaled 30,740, a slight decrease of 2.1% year-over-year, while existing condo-townhouse sales totaled 13,481, up 21.1% over July 2020. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

 Nationally, the median existing-home price for all housing types in July was $359,900, up 17.8% from July 2020 ($305,600), as each region saw prices climb. This marks 113 straight months of year-over-year gains.

 The statewide median sales price for single-family existing homes in July was $355,000, up 20.3% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $253,000, up 20.5% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

 Broward Real Estate Attracting Multiple Bids, Buyers Going Over-List Price

The median percent of original list price received for single-family homes was 100% in July 2021, up 3.2% from 96.9% last year. The median percent of original list price received for existing condominiums was 97.8%, up 2.9% from 95% last year.

The median number of days between listing and contract dates for Broward single-family home sales was 13 days, a 64.9% decrease from 37 days last year. The median time to sale for single-family homes was 57 days, a 27.8% decrease from 79 days last year.

The median number of days between the listing date and contract date for condos was 24 days, down 65.2% from 69 days. The median number of days to sale for condos was 70 days, a 36.9% decrease from 111 days.

Broward Cash Sales 67.4% More than National Figure in July 2021

Cash sales represented 38.5% of Broward closed sales in July 2021, compared to 27.4% in July 2020. About 23% of U.S. home sales are made in cash, according to the latest NAR statistics.

 The high percentage of cash buyers reflects South Florida’s top position as the preeminent American real estate market for foreign buyers, who tend to purchase with all cash as well as some moving from more expensive U.S. markets who can buy more with their profits from real estate sales.

 Cash sales accounted for 51.9% of all Broward existing condo sales and 22.7% of single-family transactions.

 by Chris Umpierre

To access July 2021 Broward County Statistical Reports, visit http://www.SFMarketIntel.com

 Note: Statistics in this news release may vary depending on reporting dates. MIAMI reports exact statistics directly from its MLS system.

  

 

Buyer Demand Didn’t Drop – It’s Hoping for a Crash

 By Amber Randall

Frustrated home buyers remember the last housing crisis and think it’s going to happen again as prices keep going higher and higher – but they’ll likely be disappointed.

FORT LAUDERDALE, Fla. – People who have spent months trying to find an acceptable, affordable home in South Florida are starting to think they’ll wait until the market collapses and they can snatch up a house at a bargain.

They’re probably going to be disappointed.

Economists and housing experts don’t expect another crash like the one in 2008, when hordes of people got homes at rock-bottom prices and then made out when the values recovered. The world is different now, economists say. The housing bubble from 15 years ago was driven largely by risky lending practices and a frenzy that drove a boom in new construction – the type of factors that lead to a recession.

Today, prices are skyrocketing as before, but the fever is the result of different forces, including low interest rates and years of underbuilding, partly because of difficulty getting supplies.

In short, we had too many homes last time; we don’t have enough now.

“The market in 2008 was very different from the market we have now,” said Zillow Economic Data Analyst Nicole Bachaud. “What we have right now is a market based on scarcity. There is not enough supply.”

Intense demand

One of the biggest differences is where the demand for housing is coming from, according to real estate agents. People from all walks of life looking to buy a home today: people wanting to relocate; millennials trying to buy their first home; people looking to upgrade for more space as remote work takes over.

“Not only do we have strong demand locally, we also have strong demand from people coming in from the Northeast,” said Bonnie Heatzig, executive director of luxury sales at Douglas Elliman in Boca Raton. “The demand is linked to the number of buyers who are out there circling neighborhoods looking for a home,”

The real estate market in the 2000s was mainly driven by the ability to get quick and easy credit, regardless of a buyer’s ability to actually afford the house, said Christina Pappas, vice president at The Keyes Company in Brickell.

“Everybody was able to purchase a home without the clear ability to pay. There was demand because the credit was available,” Pappas said. “This demand we have now is fueled by families looking to move to the suburbs.”

Stricter lending practices

Today’s lending practices are more stringent, with homebuyers now expected to come up with a bigger down payment when they go to buy a home.

“The typical person coming in today understands they have to have cash when they come to talk to us, ‘I know I have to have some money down. I’ve got to have 10% to 15% down,’” said David Druey, Centennial Bank’s Florida regional president. “During the Great Recession, we had mortgage companies and banks financing 100% of the purchase price and closing costs. We created our own crisis.”

Homebuyers are seeing this play out in the market when they go to buy a home, said Robert Esposito, a real estate associate for RelatedISG. “It’s very lengthy to get anyone approved. They re-check their income and credit to make sure nothing has changed since they went into the final process,” Esposito said.

For today’s real estate market, lower mortgage rates are contributing to the intensity in the market. Rates for a 30-year fixed mortgage stood at 3.03%, while the rates for a fixed 15 years are 2.30% as of Sept.1, according to Bankrate.com.

Sixty percent of homebuyers who financed with a mortgage said the low rates played a role in their decision to get a home, according to research from Zillow, an online real estate marketplace company.

“What really matters is the monthly payment on the home. With these interest rates, they can afford the houses because the interest rates will stay lower,” Pappas said.

Shortage of homes

The lack of homes on the market also is a turnaround from the early 2000s, when oversupply played a role in the market’s downturn, according to Tim Costello, chairman & chief executive at Builder Homesite Inc.

Today, the number of homes on the market has decreased dramatically. In Palm Beach County, listings for homes have plunged 61% compared to four years ago, while homes listed in Broward County decreased 46%. Miami Dade was similar at 39%.

“Crashes occur when there is an extreme imbalance between supply and demand. Currently, we have the opposite. It would take an extreme movement in the market to transition from where we are today to a market on the verge of a crash, “ Costello said.

More recently, Palm Beach County totaled 1.5 months of supply in the market for single-family homes, a 55% decrease from the year before. Single-family homes in Broward County dropped 51% to 1.5 months worth of supply, according to data from the Broward, Palm Beach, and St. Lucie Realtors.

“So markets where there are increasing numbers of credit-worthy shoppers competing for a diminished inventory of supply create strong markets,” Costello said.

Rising home prices

While home prices in 2021 are significantly higher than in previous years, they haven’t reached the height of prices during the 2008 crash, according to an analysis from researchers at Florida Atlantic University. During that period, homes were overvalued by almost 60%. Homes in South Florida are currently overvalued by about 13%.

“The shortage of homes for sale, continued low-interest rates and an influx of new Florida residents over the next decade should keep the state from sustaining a housing crash similar to the one of 2007 and 2008,” Ken H. Johnson, an economist in FAU’s College of Business, said in a study last month.

© 2021 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.