U.S.’s Biggest Landlords Can’t Find Houses Either

 It’s a good time to be a large investor renting out single-family homes, but it’s hard to expand. They face the same problem homebuyers do: Low inventory.

NEW YORK – High borrowing costs and a shortage of properties for sale have slowed home buying by “mega-landlords,” limiting their ability to grow at the same time suburban rents are increasing.

Selling prices keep rising due to fierce competition from individual homebuyers, who are willing to bid up the few homes hitting the market. As a result, big landlords can’t pay the current prices and still meet profit targets.

Landlords with 1,000 properties or more accounted for 0.4% of U.S. home purchases during the second quarter, down from a peak of 2.4% in late 2021, according to John Burns Research & Consulting.

Analysts say that sidelined landlords are a sign that the Federal Reserve might be closing in on the interest-rate number needed to shift the housing market down from overdrive and slow the heightened spending that accompanies growing property values.

Invitation Homes, which owns approximately 83,000 houses, has been selling properties that have appreciated to the point that they’re yielding less than 4%. They’re then putting the proceeds in the bank, where the cash is earning more than 5% that, executives say, they’ll spend when more motivated sellers start listing their homes.

AMH, owner of about 59,000 houses, was also a net seller during the first half of 2023. It sold nearly 1,100 while adding 780, mostly built-in houses.

Renting single-family homes has become much less expensive than financing purchases in the markets where the big landlords operate, says Rick Palacios of John Burns Research & Consulting.

Source: Wall Street Journal (09/20/23) December, Ryan

© Copyright 2023 INFORMATION INC., Bethesda, MD (301) 215-4688

Florida’s August Housing Market: Median Prices Rise

 By Marla Martin

Florida's single-family median price up 2% year-to-year to $415,000.

Condo/townhouse median price up 6.2% to $324,000. 

Chief Economist O’Connor: Mortgage interest rates continue to be “dominant factor.”

ORLANDO, FL. – Florida’s housing market in August reflected similar trends as the past few months – statewide median sales prices rose year-over-year while sales slowed, according to Florida Realtors®’ latest housing data.

“Prospective buyers continue to be drawn to Florida’s lifestyle, climate and job opportunities,” says 2023 Florida Realtors® President G. Mike McGraw, a broker-associate with RE/MAX Central Realty in Orlando. “Persistently higher mortgage rates and a restricted for-sale inventory are hampering sales activity. However, as our housing prices continue to stabilize and interest rates hopefully moderate, we expect conditions to return to a more balanced market with more options for buyers and sellers.”

Last month, closed sales of existing single-family homes statewide totaled 22,917, down 7.9% from August 2022, while existing condo-townhouse sales totaled 9,279, down 7.2% from the same time a year ago, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

“Mortgage interest rates continue to be the most dominant factor in sales trends here in Florida as well as the rest of the U.S., so the continued year-over-year declines we’re seeing in closed sales are not surprising,” says Florida Realtors Chief Economist Dr. Brad O’Connor. “This summer, the average 30-year fixed mortgage rate was in the neighborhood of 7%, compared to between 5 and 5.5% last summer.”

Florida’s statewide median sales price for single-family existing homes in August was $415,000, up 2% from the same month a year ago, while the statewide median price for condo-townhouse units was $324,000, up 6.2% over the August 2022 figure. The median is the midpoint; half the homes sold for more, half for less.

“These elevated levels of home prices continue to offset the impact of lower levels of sales when it comes to dollar volume, which is calculated as the total combined sale value of all home transactions closing each month,” O’Connor says. “August’s dollar volume of closed existing single-family home sales in Florida was about $13.2 billion. That’s down 4.4% compared to last August; however, dollar volume has been much closer to 2021 and 2022 levels so far this year, compared to before the pandemic in 2019.

“Year to date through August, single-family dollar volume in Florida has been about $104 billion, compared to about $69 billion during the same eight-month period in 2019. In the townhouse and condo category, dollar volume was actually up year-over-year in August, rising by 2.8%, to $4.1 billion.”

On the supply side of the market, single-family existing homes ticked up slightly to reach a 3-months’ supply in August while condo-townhouse properties rose to a 3.8-months’ supply.

To see the full statewide housing activity reports, go to the Florida Realtors Newsroom and look under Latest Releases or download the August 2023 data report PDFs under Market Data.

© 2023 Florida Realtors®

What Happens to RE if the Government Shuts Down?

 By Kerry Smith

No two shutdowns are the same, but the feds would be less responsive. Some RE products – FHA, VA and Rural Housing loans, flood insurance – may see an immediate impact.

ORLANDO, Fla. – The federal government’s fiscal year ends Sept. 30, and Congress has not yet approved an extension, with several lawmakers threatening to hold out. While a shutdown starting Oct. 1 isn’t imminent, it’s appearing more likely. Very generally, one of three things could happen:

• Congress could pass a new budget at the last minute, the president signs it and nothing will change.
• Congress could approve a short-term extension – some are talking about a 30-day one to Oct. 31 – that would keep the government operating at its current level while lawmakers continue to work out an agreement
• The government could stop funding all agencies except those considered vital to the country’s operation

If the shutdown occurs, government-related real estate products could be affected. Homebuyers that need flood insurance as a requirement for their mortgage, for example, may not be able to secure new federal policies. It could also harm mortgages backed by the government, such as FHA, VA and Rural Housing loans if the federal employees who work in the background are temporarily unemployed.

In general, the shutdown affects all federal agencies, and each handles the new situation differently.

The length of a shutdown also comes into play. While the real estate industry might see little impact over the first few days, things tend to bog down over time if Congress fails to reach an agreement. The Office of Management and Budget (OMB) coordinates shutdown plans, and the plans get updated over time on a rolling basis.

The last shutdown occurred at the end of 2018 and lasted 35 days. Two earlier ones in 2018 didn’t last as long, and the government also shut down for 16 days in 2013.

© 2023 Florida Realtors®

Lower Rates May Not Help South Florida Buyers

 By Rebecca San Juan

Demand is so strong that high mortgage rates haven’t lowered home prices. And while “waiting for a lower rate” sounds good, it could make buyer demand even stronger.

MIAMI – Since 2019 prior to the pandemic, the number of houses and condominiums for sale at or below the median sales prices in South Florida has plunged.

New figures quantify the extremely tight supply of homes in Miami-Dade, Broward and Palm Beach counties that middle-class homebuyers can typically afford, and show a prime reason why many house hunters haven’t been able to find houses or condos they can afford to buy.

Consistently through the pandemic that began in March 2020, housing experts have said home prices kept soaring in South Florida for myriad reasons, with short supply being the main one. Now, for the first time the Miami Herald has the data to show just how thin the inventory of homes has been, making it highly competitive for many buyers to land affordable homes.

Each of the three counties in the region has seen a drop between 56% and 87% in the inventory of single-family houses and condos listed for sale from July 2019 to July 2023 at or below median sales prices, according to data from the Multiple Listing Service and Ana Bozovic, a real estate analyst and founder of Analytics Miami and Miami Dealsheet.

“It’s a very difficult situation. You should expect prices to fall when interest rates go up, but not here,” Bozovic said. “That’s because of the surge of economic activity and supply shortage.”

Median sales prices in July were $631,670 for houses in Miami-Dade, $600,000 in Broward and $600,000 in Palm Beach County. Condo median pricing, meanwhile, was $420,000 in Miami-Dade, $280,000 in Broward, and $315,000 in Palm Beach.

Here’s the county-by-county breakdown of the dwindling availability of houses and condos for sale over the past four years:

• In Miami-Dade, there were 1,103 single-family homes on the market at or below the median in July, a drop of 76% from 4,568 listings in July 2019. The condo market experienced a similar free fall of 72%, to 2,456 listings at or below $420,000 from 8,806 listings four years ago.

• In Broward in July, there were 1,363 houses listed in that price range, 72% fewer than the 4,836 on the market in July 2019. Also, 2,521 condos were listed at or below the median, 56% fewer than 5,759 condo listings four years ago.

• The situation looks equally grim in Palm Beach County. It had 966 houses for sale at or below the median price two months ago, down 79% from 4,561 house listing in July 2019. And 171 condos were on the market in that price range in July, an 87% drop from 1,355 condos in July 2019.

These figures make plainly and painfully clear the challenging South Florida housing market for budget-conscious buyers. It’s a situation that’s worsened in the pandemic when wealthy buyers flooded into the region, buying homes with cash, and real estate developers most often opting to build homes well above the median-price point.

Real estate analysts expect it’ll take years for the supply of cheaper homes to increase to a plentiful level. A complicating factor is that more sellers of existing homes in the three counties have stayed put as mortgage rates kept climbing the past couple of years before reaching a 20-year peak this summer.

“On the low end, the loss of inventory is because people cannot afford to move, because of the spike in median pricing since pre-Covid and the surge in interest rates,” Bozovic said.

Still, South Florida continues to see steady demand for its depleted housing market. Miami-Dade, for example, only has a 3.2-month supply of houses and 5.1 months’ worth of condos available. Both are below the six to nine months of inventory needed for a balanced housing market.

New-home construction is underway across the region, which should bring more affordable homes on the market for sale in the coming months. However, it won’t be enough for buyers to expect home prices to fall, said Mark Thibodeau, a real estate professor at Florida International University’s Tibor and Sheila Hollo School of Real Estate.

“To see the supply to meet demand it is going to take years,” Thibodeau said. “At the end of the day, Miami is constrained by geography. We have as much land as we have. As long as people want to live here, as long as there’s economic growth, we will likely see appreciation in property value and that just means the median [home sales price] will continue to go up. Then it becomes about whether incomes are rising at a fast enough pace to keep up with housing costs.”

For now, many real estate experts recommend buyers who have the financial means to settle for what’s on the market and purchase a house or condo, because there will be even more competition to buy in South Florida when interest rates fall later this year or in 2024.

“Don’t wait,” Bozovic said. “Interest rates will go back down, but not to the lows that we had.”

© 2023 Miami Herald. Distributed by Tribune Content Agency, LLC.

Vacation Home Demand Close to Seven-Year Low

 By Kerry Smith

Vacation-home buyers face the same headwinds as other buyers, plus pandemic demand ended, and many have return-to-the-office orders, with loan rate locks down 50%.

SEATTLE – Vacation homes were hot during the pandemic as workers freed from the office look for places where they could spread out. But that pace may have cannibalized current demand as some vacation-home buyers jumped into the market a few years earlier than planned. Plus vacation homebuyers today face the same challenges as homesteaders, notably low inventory, and higher home prices and mortgage rates.

Using mortgage-rate locks as a gauge for homebuyer demand, a study found that they were down 47% from pre-pandemic levels on a seasonally adjusted basis in August compared to a 33% decline for primary homes, according to a Redfin study.

August marks the 14th-straight month that second-home demand as hovered at least 30% below pre-pandemic levels, as high housing costs and limited inventory deter would-be buyers. Rate locks for second homes hit a seven-year low in February, dropping to 52% below pre-pandemic levels.

A mortgage-rate lock is an agreement between a homebuyer and lender that allows the homebuyer to lock in an interest rate on a mortgage for a certain period of time; roughly 80% of rate locks result in purchases.

Demand for second homes is also down (19%) year-to-year. Mortgage-rate locks for second homes, which is also bigger than the 14% decline for primary homes.

The pandemic may have also influenced the current market. Vacation home mortgage locks skyrocketed during the pandemic, hitting a peak of 88.5% above pre-pandemic levels in October 2020. Affluent Americans jumped at the chance to snap up second homes with record-low mortgage rates during a time when many of them could work remotely from vacation towns.

Demand for primary homes jumped during that time, too, but the increase was much more modest, reaching a peak of 16% above pre-pandemic levels in late 2020.

Variety of reasons for vacation home drop

• It’s more expensive to buy a second home. The typical home in a seasonal town – where many second homes are located – sells for $564,000, up 5% from a year earlier, though it’s comparable to non-seasonal towns ($421,000), also up 5%. However, mortgage rates for second homes are also typically higher. In addition, the federal government increased second homes’ loan fees in 2022, which sometimes adds tens of thousands of dollars to the cost.
• Many workers are returning to the office. The allure of second homes has diminished as many companies tighten employees’ ability to work remotely.
• Short-term rentals are less attractive. The “rent it out on Airbnb” options may be less attractive than it once was. Some U.S. cities created new regulations, and the maturing short-term rental industry has faced some internal problems during its growth.
• The long-term rental market is cooling. Buying a vacation home to rent out long term is less attractive, too. Although asking rents are still high, many landlords are offering concessions to attract renters. Plus, there’s a rising number of vacancies for landlords to fill with many new units set to hit the market soon.

© 2023 Florida Realtors®

10% of of listings are "Back to Office" home sellers

 By Kerry Smith

If more workers are called back to the office, would the housing inventory improve? Still, top reasons remain family, more space and/or a lower cost of living.

SEATTLE – Return-to-work policies are starting to have a measurable impact on sellers’ reasons for listing their home, with a recent study finding it a top reason for one in every 10 (10.1%) listings.

While returning to the office wasn’t the most common reason respondents listed for moving, the response rate is notable because back-to-office mandates are an emerging cause of relocation, according to a study conducted by Qualtrics and commissioned by Redfin covering May-June 2023.

In Boise, Idaho, Redfin Premier agent Shauna Pendleton has a pair of clients selling their home after only about a year because their Seattle-based employer is requiring them to return to the office. They will likely have to sell at a loss since they bought when home prices were near their peak.

“My sellers both work at the same company, which told them they have to be in the office three days a week or they’ll lose their jobs,” Pendleton says. “They have six months to make the move. They’ll probably have to take a $100,000 loss on their home; their new house in Seattle won’t be anything close to the size of their property in Boise; and their mortgage rate will be much higher.”

Other reasons homeowners are selling

With mortgage rates near the highest level in over two decades, there aren’t a ton of people selling their homes, meaning many who do decide to sell don’t have the luxury to wait. But the results of Redfin’s survey show that movers today are still considering factors including climate change and social issues:

• 19.3% of survey respondents with plans to sell within the next year want to relocate to live in a place better aligned with their views on social issues
• 19% cited lower taxes
• 17.9% noted concerns about safety/crime
• 10.6% plan to move because they’ve dealt with discrimination in their neighborhood
• 8.4% had concerns about the impact of climate change on their neighborhood

“Real estate is all about priorities and compromise,” says Redfin Chief Economist Daryl Fairweather. “While a lot of homeowners are staying put, refusing to give up their rock-bottom mortgage rates, some are opting to trade their low rate for a safer neighborhood, lower taxes and/or neighbors with the same political views.”

The desire for more space is the most common factor driving people to relocate, which has been historically been in the top three:

• 33.8% cited “more space” as a reason for their move
• 22.6% said it was a desire to be closer to family
• 21.6% wanted a lower cost of living

© 2023 Florida Realtors®

Household Income Fell 8.8% as Home Prices Rose

 By Kerry Smith

U.S. households had 8.8% less to spend in 2022 (after taxes) than they did in 2021 due in part to 2021’s pandemic checks and expiring tax credits, such as some for childcare.

WASHINGTON – Real median household income after taxes fell 8.8% to $64,240 from 2021 to 2022, according to a report from the U.S. Census Bureau. And the poverty rate after taxes as measured by the Supplemental Poverty Measure (SPM) increased 59% to 12.4% over the same period. With “real median income,” inflation’s impact is backed out to make year-to-year numbers comparable.

Before-tax real income didn’t show the same gap, though it also declined. In the Census Bureau’s Income in the United States: 2022 and Poverty in the United States: 2022, before-tax median household income declined 2.3% to $74,580 and the poverty rate (11.5%), as measured by the official poverty measure, was not statistically different from 2021.

The larger-than-usual difference can be attributed to changes in federal tax policy, according to the Census Bureau.

In 2022, several policies enacted by the American Rescue Plan Act (ARPA) expired, including an expansion of the Earned Income Tax Credit (EITC) for filers without children and full refundability of the Child Tax Credit (CTC) and Child and Dependent Care Tax Credit (CDCTC). ARPA also increased the maximum amount of CTC.

In addition, most households also received Economic Impact Payments (EIP) in 2020 and 2021 that were no longer issued in 2022.

The tax-policy rollback had the largest effect on post-tax income for the nation’s lowest-income households, which, in turn, had an impact on the U.S. poverty rate. In 2021, for example, post-tax income for Americans in the bottom tenth percentile was 17.1% higher than the corresponding pretax income estimate, reflecting a substantial boost that year from the EIP and expanded CTC.

In 2022 that changed back, and estimates of pretax and post-tax income at the tenth percentile weren’t significantly different.

Lower post-tax income, particularly at the bottom of the income distribution, also resulted in an increase in income inequality. The Gini index – a common measure of how unequal incomes are for pretax income – was 1.2% lower in 2022 than in 2021, reflecting real income declines for the wealthiest American households.

However, the post-tax Gini index was 3.2% higher among lower-income households due to substantial declines in post-tax income.

Source: U.S. Census Bureau, John Creamer and Matt Unrath

© 2023 Florida Realtors®

The median U.S. asking rent in July was $2,038, just $16 below the record high set in August 2022

 SEATTLE – The median U.S. asking rent in July was $2,038, just $16 below the record high set in August 2022. That’s according to a new report from Redfin.

While rents are just shy of their all-time high, rent growth remains sluggish. The median asking rent was up just 0.3% from a year earlier in July, compared with a 13.6% annual gain in July 2022.

Rent gains cooled over the past year due to an increase in supply, economic uncertainty and slowing household formation, but big bargains are still often hard to come by given rents are near record highs.

“While rents are flattening out, it’s too early to say whether rent growth has bottomed,” said Redfin Deputy Chief Economist Taylor Marr. “A strong job market, cooling inflation and increasing consumer spending – which have decreased the likelihood of a recession – point to resilient renter demand. But there are still a lot of newly built apartments that have yet to hit the market, meaning rents may still have room to fall as landlords grapple with rising vacancies.”

The median asking rent is near its record high when the housing market tends to be “downside sticky,” meaning prices don’t typically fall substantially even when business is slow, Marr added. Instead of lowering rents, many landlords offer perks like a free month’s rent or discounted parking, which tend to be less detrimental to profits.

The number of options renters can choose from has steadily climbed over the past decade. Completed residential projects in buildings with five or more units rose 26.3% year-over-year to 476,000 on a seasonally adjusted basis in June – the most recent month for which data is available – meaning landlords have more vacancies to fill and less leeway to raise prices.

But there are signs that the homebuilding boom is easing. The number of permitted residential projects in buildings with five or more units fell 33.4% year over year to 465,000 on a seasonally adjusted basis in June, the biggest drop since 2016.

Permits, or approvals given by local jurisdictions to start construction projects, are a leading indicator of what’s happening in the housing market. Completions are a lagging indicator.

Rents fall in the West, rise in the Midwest and Northeast

In the West, the median asking rent fell 1.1% year over year to $2,451 in July. And in the South, it rose 0.3% to $1,674 – the smallest increase since 2020. By comparison, asking rents rose 4.6% to a record $2,533 in the Northeast and climbed 4.3% to a record $1,416 in the Midwest.

The rental market has cooled quickly in the West and South in part because those markets saw outsized rent increases during the pandemic. Rents skyrocketed as people flooded into Sun Belt cities including Phoenix, Miami and Dallas. Now, rents in those regions have relatively more room to fall – especially as renters increasingly find themselves priced out of certain cities. The West has also been disproportionately impacted by layoffs in the tech sector, which may be contributing to its soft rental market.

While rents in the West and South have been relatively sluggish, it’s worth noting that these regions’ rental markets have started to stabilize in recent months as the impact of the pandemic price boom moves further into the rearview mirror and layoffs ease.

Source: Redfin

© 2023 Florida Realtors®

Redfin: U.S. Asking Rents Inch Closer to Record High

 The median U.S. asking rent in July was $2,038, just $16 below the record high set in August 2022. But that asking rent was up just 0.3% from a year earlier in July.

SEATTLE – The median U.S. asking rent in July was $2,038, just $16 below the record high set in August 2022. That’s according to a new report from Redfin.

While rents are just shy of their all-time high, rent growth remains sluggish. The median asking rent was up just 0.3% from a year earlier in July, compared with a 13.6% annual gain in July 2022.

Rent gains cooled over the past year due to an increase in supply, economic uncertainty and slowing household formation, but big bargains are still often hard to come by given rents are near record highs.

“While rents are flattening out, it’s too early to say whether rent growth has bottomed,” said Redfin Deputy Chief Economist Taylor Marr. “A strong job market, cooling inflation and increasing consumer spending – which have decreased the likelihood of a recession – point to resilient renter demand. But there are still a lot of newly built apartments that have yet to hit the market, meaning rents may still have room to fall as landlords grapple with rising vacancies.”

The median asking rent is near its record high when the housing market tends to be “downside sticky,” meaning prices don’t typically fall substantially even when business is slow, Marr added. Instead of lowering rents, many landlords offer perks like a free month’s rent or discounted parking, which tend to be less detrimental to profits.

The number of options renters can choose from has steadily climbed over the past decade. Completed residential projects in buildings with five or more units rose 26.3% year-over-year to 476,000 on a seasonally adjusted basis in June – the most recent month for which data is available – meaning landlords have more vacancies to fill and less leeway to raise prices.

But there are signs that the homebuilding boom is easing. The number of permitted residential projects in buildings with five or more units fell 33.4% year over year to 465,000 on a seasonally adjusted basis in June, the biggest drop since 2016.

Permits, or approvals given by local jurisdictions to start construction projects, are a leading indicator of what’s happening in the housing market. Completions are a lagging indicator.

Rents fall in the West, rise in the Midwest and Northeast

In the West, the median asking rent fell 1.1% year over year to $2,451 in July. And in the South, it rose 0.3% to $1,674 – the smallest increase since 2020. By comparison, asking rents rose 4.6% to a record $2,533 in the Northeast and climbed 4.3% to a record $1,416 in the Midwest.

The rental market has cooled quickly in the West and South in part because those markets saw outsized rent increases during the pandemic. Rents skyrocketed as people flooded into Sun Belt cities including Phoenix, Miami, and Dallas. Now, rents in those regions have relatively more room to fall – especially as renters increasingly find themselves priced out of certain cities. The West has also been disproportionately impacted by layoffs in the tech sector, which may be contributing to its soft rental market.

While rents in the West and South have been relatively sluggish, it’s worth noting that these regions’ rental markets have started to stabilize in recent months as the impact of the pandemic price boom moves further into the rearview mirror and layoffs ease.

Source: Redfin

© 2023 Florida Realtors®

More Americans Dropping Their Home Insurance

Survey: 12% of U.S. homeowners don’t have property insurance. About half of them have household incomes of $40,000 or less and say they can’t afford it.

NEW YORK – Policyholders increasingly opt out of homeowners insurance as premiums become unaffordable.

Bankrate found the average premium for $250,000 in dwelling coverage rose to $1,428 per year – a nearly 22% increase from 2022.

Wealthier homeowners say they have enough savings to rebuild if a natural disaster damages or destroys their home – but experts say they may be in for a surprise. They’ll need more than just home rebuilding costs and money to replace contents. They’ll also have to cover the cost of debris removal.

“It is a risky proposition to go without home insurance, and you need to fully understand the financial consequences if you lose your home,” says financial adviser Noah Damsky.

Over the past three years, Executive Director Amy Bach at United Policyholders says she’s seen more people who own their homes outright or inherited a home drop insurance because they can’t afford or can’t accept the current high price of home insurance.

Still, other policyholders are forgoing insurance coverage because their carrier didn’t renew their policy due to increased catastrophe risks.

According to a 2023 survey by the Insurance Information Institute and Munich Re, homeowners with a mortgage face a secondary risk if they choose to go without an insurance policy: lender-placed insurance, which is more expensive than average homeowners insurance and usually covers less.

Source: Wall Street Journal (08/28/23) Dagher, Veronica

© Copyright 2023 INFORMATION INC., Bethesda, MD (301) 215-4688

A “Livability” study attempted to rank states based on how happy they’ll make residents

 By Kerry Smith

Florida was No. 6 – but No. 1 in some categories.

ORLANDO, Fla. – Around 8.6% of Americans moved last year, a slight uptick from the year before. Some movers wonder if they should stay put or move to another state. Others know they want to move to another state, but which one?

To help answer that question, a personal-finance website, WalletHub, released a comprehensive report on 2023’s Best States to Live In.

WalletHub compared the 50 U.S. states across 51 key indicators of livability, which is subjective by definition. But they also weighed each variable for its worth, which can change from person-to-person.

As a result, the “best state to live in” may not be true for any specific person – but WalletHub believes it's true for the average person. And for that average person, Florida ranks No. 6 on WalletHub’s list of best-to-live-in states.

Florida “Living Conditions” examples (1=Best, 25=Average)

• No. 9 – Income Growth
• No. 17 – Percent of Adults in Fair or Poor Health
• No. 27 – Average Weekly Work Hours
• No. 1 – Restaurants per Capita
• No. 1 – Unemployment Rate

What should state-to-state movers consider?

Jesse Saginor, Ph.D., AICP, chair and professor, Department of Urban and Regional Planning at Florida Atlantic University, says they should start with a market analysis.

“Ultimately, this depends on the person and where that person is in life,” Saginor says. “A young person might want an area with great job prospects related to that person’s industry of interest and/or other activities that person enjoys. So, beyond work, if that person enjoys the outdoors, then the combination of job and outdoor amenities might be the two most important things on that person’s list. If that person has young children, then schools become another part of the equation.”

While WalletHub’s list might work for the average person, “Each step in a personal market analysis to determine whether an area is right for that person comes with additional dimensions,” Saginor adds. “In terms of pondering steps, where does that person want to be now, in five years, in ten years? Is there a place that enables them to have that personal growth without moving?”

“Use online resources to research basics like cost-of-living and housing costs in particular, employment opportunities, quality and cost of education and health care, state and local tax policies, climate, and given the recent political polarization in this country, where does the area lie in terms of liberal vs. conservative politics,” adds Alan Weinstein, Professor Emeritus, Cleveland State University. “Plan to visit the area for at least a few days and longer if possible. If you are able to work remotely and a longer stay is possible, that is even better.”

The most important financial factors when deciding where to live?

 “I tend to focus on the cost of living relative to the employment opportunities available in the area,” says H. Shelton Weeks, professor and director of the Lucas Institute for Real Estate Development & Finance, Florida Gulf Coast University.

“In addition to cost-of-living calculators that allow individuals to compare locations to see how much they will need to earn to have a comparable standard of living, there are other tools available that will help them understand what to expect in terms of cost for rental housing and whether market conditions indicate that renting or buying makes more sense. Combining these tools with solid budgeting can help people make better decisions with respect to potential moves.”

What can state policymakers do to attract and retain new residents?

 “I think this starts with creating an environment that is business-friendly with a high degree of economic freedom,” says Weeks. “One of the key lessons that can be learned from the experience of states that have struggled with attracting and retaining residents is that less government intervention in markets is a good thing.”

“Adopt and maintain policies that: (1) attract new and keep existing employers that offer good-paying jobs with benefits; (2) adequately fund public education from pre-school through post-graduate; (3) adequately maintain and build as needed transportation infrastructure, including public transit where appropriate; and (4) fund governmental services as adequately as possible while holding tax increases as low as possible,” says Weinstein.

Factors WalletHub weighed to create its list of most livable states

Affordability – total points: 20

• Housing affordability: full weight (~2.22 points)
• Median annual property taxes: double weight (~4.44 points)
• Cost of living: quadruple weight (~8.89 points)
• Median annual household income: full weight (~2.22 points)
• Homeownership rate: full weight (~2.22 points)

Economy – total points: 20

• Unemployment rate: full weight (~1.05 points)
• Underemployment rate: full weight (~1.05 points)
• Sharecare well-being “economic security”: full weight (~1.05 points)
• Share of population living in poverty: full weight (~1.05 points)
• Median debt per median earnings: triple weight (~3.16 points)
• Population growth: full weight (~1.05 points)
• Income growth: full weight (~1.05 points)
• Building-permit growth: full weight (~1.05 points)
• Wealth gap: full weight (~1.05 points)
• General tax-friendliness: full weight (~1.05 points)
• Entrepreneurial activity: double weight (~2.11 points)
• Foreclosure rate: double weight (~2.11 points)
• Bankruptcy rate: full weight (~1.05 points)
• Food insecurity: full weight (~1.05 points)

Education & health – total points: 20

• Quality of public school system: full weight (~1.74 points)
• High school graduation rate: double weight (~3.48 points)
• Share of population aged 25 & older with a high school diploma or higher: full weight (~1.74 points)
• Share of insured population: full weight (~1.74 points)
• Quality of public hospital system: full weight (~1.74 points)
• Premature-death rate: half weight (~0.87 points)
• Poor or fair health: half weight (~0.87 points)
• Life expectancy: full weight (~1.74 points)
• Share of live births with low birthweight: half weight (~0.87 points)
• Share of obese adults: double weight (~3.48 points)
• Share of physically inactive adults: full weight (~1.74 points)

Quality of life – total points: 20

• Average hours worked per week: full weight (~0.93 points)
• Average commute time (in minutes): full weight (~0.93 points)
• Miles of trails for bicycling & walking per total state land area: full weight (~0.93 points)
• “bicycle friendly state” ranking (proxy for bike score): full weight (~0.93 points)
• Infrastructure & funding – 20%
• Education & encouragement – 15%
• Legislation & enforcement – 15%
• Policies & programs – 20%
• Evaluation & planning – 20%
• Discretionary scoring – 10%
• Access to public transportation: double weight (~1.86 points)
• Quality of roads: full weight (~0.93 points)
• Traffic congestion: double weight (~1.86 points)
• Restaurants per capita: double weight (~1.86 points)
• Bars per capit*: full weight (~0.93 points)
• Museums per capita: full weight (~0.93 points)
• Performing arts centers per capita*: full weight (~0.93 points)
• Movie theaters per capita: half weight (~0.47 points)
• Fitness centers per capita: double weight (~1.86 points)
• Accessibility of beaches: full weight (~0.93 points)
• Weather: triple weight (~2.79 points)
• Air quality: full weight (~0.93 points)

Safety – total points: 20

• Violent-crime rate: full weight (~3.64 points)
• Property-crime rate: double weight (~7.27 points)
• Traffic-related fatalities per capita: half weight (~1.82 points)
• Total law-enforcement employees per capita: double weight (~7.27 points)

© 2023 Florida Realtors®

Intro to Mortgage Insurance - The 80/20 Rule

 By Christopher Carter

Mortgages revolve around a 20% down payment, and buyers who put less down use mortgage insurance to do so – yet many don’t understand what that means.

KEY BISCAYNE, Fla. – Mortgage Insurance is one of the most misunderstood topics in real estate.

When buyers use financing and their down payment is less than 20% of the purchase price (or appraised value), lenders require mortgage insurance. Lenders’ tracking studies indicate that when buyers start out with less than 20% initial equity in the property, there is a higher risk of the loan going into default, then into foreclosure. Mortgage Insurance (MI) offsets the risk of lender financial loss.

Real estate’s 80/20 Rule refers to the Loan-To-Value (LTV) ratio, a primary element of all lenders’ risk management. A mortgage loan’s initial LTV ratio represents the relationship between the buyer’s down payment and the property’s value (20% down = 80% LTV).

Here are 3 important points to keep in mind while reading today’s article:

• Mortgage Insurance protects the lender from loss, though the borrower pays the insurance premiums. MI premiums do not go toward principal or interest, they are separate additional charges. Initial LTV (and the need for MI) is determined by the amount of the buyer/borrower’s down payment.

• With less than a 20% down payment, buyers pay MI premiums for coverage that reimburses the lender for its loss if the borrower defaults on the terms of the loan. MI is an additional charge to buyers in conventional as well as government-insured financing programs. Depending on the loan program and MI requirements, premiums might be paid upfront, monthly, or both.

• On conventional (not government-insured) mortgages, those premiums are paid to third-party specialty insurance companies. With government-insured mortgages (FHA, VA, USDA), MI premiums are paid to the insuring government agency.

(Important: The Mortgage Insurance we are discussing today is NOT to be confused with Mortgage Life Insurance, which pays off the remaining mortgage balance in the event of the borrower’s death. They are very different insurance policies used for very different purposes.)

Most people have seen the acronym “PMI,” which stands for Private Mortgage Insurance. PMI is issued by specialty insurance companies for conventional loans in which the buyer/borrower has put down less than 20%. Annual premiums for PMI depend on initial LTV (down payment amount), credit score, property type, and other transaction details. PMI can be structured as a one-time payment at closing (upfront), monthly payments added to scheduled principal and interest payments, or a split plan combining both upfront and monthly.

Mortgage insurance premium structure overview

Note: Upfront MI payments on government-insured loans can be wrapped into the loan amount. Conventional one-time upfront MI must be paid at closing.

Lenders might pay for a borrower’s PMI in exchange for charging a higher interest rate for the life of the loan. Ask your licensed Loan Originator about Lender-Paid Mortgage Insurance (LPMI) and other lower down payment programs.

Under the U.S. Homeowners Protection Act (HPA) of 1999, borrowers may request, in writing, that conventional PMI be removed (and ongoing PMI payments ended) when the loan principal balance is paid down to 80% (there’s that 80/20 Rule again) of the property’s appraised value when purchased. Also under the HPA, lenders must remove PMI when LTV reaches 78% of the property’s original value, as long as payment history has been satisfactory.

Important: This removal procedure ONLY applies to conventional mortgages, not government-insured financing.

The Federal Housing Administration (FHA) is an agency of the US Department of Housing and Urban Development (HUD), a Cabinet-level department of the Federal government. To help make mortgage funding available to a broader range of buyers, the FHA insures independent lenders against buyer/borrower default.

FHA qualifying standards for borrowers are more lenient than most lenders’ conventional loan programs. These standards help buyers with lower credit scores and lower down payments qualify for mortgage financing on primary residences. Lenders are more willing to make loans using these broader qualifying standards when they are protected by FHA insurance.

FHA-insured financing includes both upfront and monthly Mortgage Insurance Premiums (MIP). The upfront portion can be either paid at closing or wrapped into the total loan amount, and is required on all FHA-insured mortgage financing. There is also an annual MI premium that is paid with the borrower’s monthly PITI (Principal, Interest, Taxes, Insurance) payment.

For FHA-insured mortgages, the annual MIP stays in place for 11 years when the initial LTV is less than 90%. This means that buyers putting down more than 10% will be paying monthly MI for the next 11 years unless they refinance or move within that time.

When buyers use a less than 10% down payment, FHA MIP stays in place for the life of the loan. In this case, buyers could be paying monthly MI premiums for up to 30 years, or until they refinance or sell the property.

© Copyright 2023 IslanderNews.com, Key Biscayne, FL. This report was first published in The Florida Real Estate Blog by Chris Carter, a real estate broker associate and former Key Biscayne resident.

60% of metro markets (128 out of 221) registered home price gains in the second quarter of 2023

 By Kerry Smith

Overall, though, U.S. home prices dropped 2.4% year-to-year because total declines outweighed increases. Still, 5% of markets saw double-digit price increases.

WASHINGTON – Almost 60% of metro markets (128 out of 221) registered home price gains in the second quarter of 2023 as 30-year fixed mortgage rates oscillated between 6.28% and 6.71%, according to the National Association of Realtors®’ (NAR) second quarter report.

Some areas – 5% of the 221 – continued to see double-digit, year-to-year price increases, though the percentage dropped from 7% in 1Q 2023.

“Home sales were down due to higher mortgage rates and limited inventory,” says NAR Chief Economist Lawrence Yun. “Affordability challenges are easing due to moderating and, in some cases, falling home prices, while the number of jobs and income (levels) are increasing.”

Compared to a year ago, the national median single-family existing-home price dipped 2.4% to $402,600. In 2Q 2022, the national median price had decreased 0.2%.

“Just like the weather, large local market variations exist despite the minor change in the national home price,” Yun adds.

Among the major U.S. regions, the South – the area that includes Florida – saw the largest share of single-family existing-home sales (46%) in the second quarter, with year-over-year price depreciation of 2.2%. 

Prices rose 3.2% in the Northeast and 1.4% in the Midwest but retreated 5.8% in the West, with noteworthy declines in Austin (down 19.1%), San Francisco (11.3%), Salt Lake City (9.6%) and Las Vegas (7.4%).

“Interestingly, price declines occurred in some of the fastest job-creating markets,” Yun says. “Prices in these areas are trying to land on better fundamentals after several years of skyrocketing increases. In fact, the number of homes receiving multiple offers, alongside continuing job and wage gains, signal price slides may already be a thing of the past.”

The top 10 metro areas with the largest year-over-year price increases all recorded gains of at least 10.4%, with six of those markets in the Midwest. Those include Fond du Lac, Wis. (up 25.3%); New Bern, N.C. (19.7%); Duluth, Minn.-Wis. (14.6%); Davenport-Moline-Rock Island, Iowa-Ill. (12.6%); Allentown-Bethlehem-Easton, Pa.-N.J. (11.7%); Kingsport-Bristol-Bristol, Tenn.-Va. (11.5%); Peoria, Ill. (11.5%); Green Bay, Wis. (10.9%); Trenton, N.J. (10.5%); and Cape Girardeau, Mo.-Ill. (10.4%).

Seven of the top 10 most expensive markets in the U.S. were in California. Overall, those markets are San Jose-Sunnyvale-Santa Clara, Calif. ($1,800,000; down 5.3%); San Francisco-Oakland-Hayward, Calif. ($1,335,000; down 11.3%); Anaheim-Santa Ana-Irvine, Calif. ($1,250,000; down 3.8%); Urban Honolulu, Hawaii ($1,060,700; down 7.4%); San Diego-Carlsbad, Calif. ($942,400; down 2.4%); Salinas, Calif. ($915,600; up 0.6%); Oxnard-Thousand Oaks-Ventura, Calif. ($904,900; down 2.7%); San Luis Obispo-Paso Robles, Calif. ($890,900; down 3.2%); Boulder, Colo. ($871,200; down 6.7%); and Naples-Immokalee-Marco Island, Fla. ($850,000; unchanged).

2Q home sales report takeaways

• About two in five markets (41%; 90 of 221) saw home price declines, up from 31% in the first quarter.

• Housing affordability worsened quarter-to-quarter due to rising home prices and mortgage rates. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,051, up 10% from the first quarter ($1,864) and 11.6% – or $214 – from one year earlier.

• Families typically spent 27% of their income on mortgage payments, up from 24.5% in the previous quarter and 25.3% one year ago.

• Lack of inventory and affordability continued to impact first-time buyers during the second quarter. For a typical starter home valued at $342,200 with a 10% down payment loan, the monthly mortgage payment grew to $2,012, up 9.9% from the previous quarter ($1,830). That was an increase of more than $200, or 11.3%, from one year ago ($1,807).
  
  First-time buyers typically spent 40.7% of their family income on mortgage payments, up from 37.1% in the prior quarter.

• A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 40.3% of markets, up from 33% in the prior quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 6.3% of markets, down from 10% in the previous quarter.

Data tables for MSA home prices (single-family and condo) are posted on NAR’s website. If insufficient data is reported for an MSA in a particular quarter, it is listed as N/A.

© 2023 Florida Realtors®