HUD Announces 2023 Fair Market Rent Limits

 By Kerry Smith

HUD’s Secretary said higher FMR limits will expand housing opportunities. Based on location, Florida’s start at $623 for an efficiency and goes to $3,433 for 4 bedrooms.

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) published its Fair Market Rents (FMRs) for Fiscal Year 2023. FMRs, published annually, are an estimate of the amount of money that would cover gross rents (rent and utility expenses) on 40% of the rental housing units in an area. It’s the basis for other HUD calculations, such as Section 8 vouchers.

Nationally, HUD says FMRs will increase by an average of about 10%.

“One of the reasons that housing voucher holders are unable to use those vouchers is because the value of their vouchers has not kept up with rapid rent increases,” says HUD Secretary Marcia L. Fudge. “These new FMRs will make it easier for voucher holders … to access affordable housing in most housing markets, while expanding the range of housing opportunities available to households.”

Florida Fair Market Rents in 2023

HUD has posted a roster of nationwide FMRs broken down by state and, in many cases, metro area. To see a breakdown for Florida, visit HUD’s analysis and select “Florida” from the menu.

The chart further breaks down rentals by size, from efficiencies to four bedrooms. In Florida, the least expensive FMR ranges from $623 for an efficiency in Levy and Washington counties, up to $3,433 for a four-bedroom rental in Monroe County.

HUD is required by law to set FMRs every year. FMRs, which go into effect on Oct. 1, are used in several HUD programs, including to determine the maximum amount that a Housing Choice Voucher will cover.

© 2022 Florida Realtors®

U.S. Housing Market at a Crossroads

 By Terry Collins

Homes reached record prices in early 2022 – so is the current market a housing recession or just a market correction? Experts disagree and it’s too soon to know.

NEW YORK – A widening debate about where the U.S. housing market stands: Is it in a recession or a correction?

Experts are drawing various conclusions while looking at the same indicators on everything from the Federal Reserve’s hawkish stance on interest rates to the sentiment of homebuilders, real estate agents and buyers on their gut feelings on where the market is heading.

The multiple scenarios are reflective of the market’s imbalance, with new construction and existing-housing sales down compared with last year, while home prices remain high.

The housing market “is giving off a lot of mixed signals,” said Neda Navab, president of brokerage operations at real estate company Compass in New York. “If you’re a pessimist, you can find plenty to keep you up at night. If you’re an optimist, there are plenty of silver linings.”

That leads experts to guess about what’s ahead.

Is there a housing slowdown?

There is widespread consensus that the housing market has experienced a drastic drop-off in activity since its pandemic-prompted heights.

That slowdown will continue, with moderate price declines for about 18 months, said Greg Phillips, chief technology officer of Houwzer, a Philadelphia real estate startup. The housing market is “not like the volatile stock market, always going up and down; the housing market moves at a different, slower pace,” he said.

Compass’ Navab said millions of buyers “still want and need to purchase homes,” though some buyers are pulling back in the face of limited affordability, increased mortgage rates and overall economic uncertainty.

Buyers, sellers and real estate agents already are adjusting to the slowdown, said Navab, who notes that home sales prices, though lower, remain high. “The market simply could not, and was never expected to, grow at that pace indefinitely,” Navab said. “Whether this trend will continue long enough for the market to enter a true ‘recession,’ or if this is simply the start of an expected ‘correction’ to historic norms, still remains to be seen.”

However, Navab said that if the market does indeed stabilize at or near the current levels, “I would call that a ‘correction’ and not a ‘recession.’”

The case for a housing correction

Navab is hedging on a correction, citing the “the breakneck pace” of the housing market the past two years, including monthly sales regularly topping 6 million at an annualized rate and annual home price growth of 20% or more in many markets, was “both unprecedented and unsustainable.”

For example, Phillips noted that home prices in Philadelphia; Washington, D.C.; and the Florida cities of Jacksonville, Orlando, and Tampa-St. Petersburg are up as much as 20%.

Navab said the demographic drivers of housing demand powered the market largely due to “a robust millennial generation” that she feels will drive it for years. “Well-qualified buyers that can afford to be patient and or can adjust their budgets may find more negotiating room and supply than they’ve had in years,” Navab said. “Sellers that are disciplined on their price should still expect plenty of attention on their listings.”

David Goswick, a 30-year veteran of the housing industry, believes the housing market is simply in a correction. The co-founder of House X World, a Houston real estate brokerage, Goswick said the market has been “a runaway train” since the pandemic began. Now, with pricey new and resale homes, and new construction slowing, the market is readjusting.

He also thinks having a 90-day housing forecast now is “meaningless,” as the market should be looked at in real-time through seven-day trends.

The case for a housing recession

Robert Dietz, the chief economist for the National Association of Home Builders, makes the case that the U.S. housing market is in a recession, citing eight straight months of declining homeowner sentiment.

The trade group’s Housing Market Index, which rates the relative level of current and future single-family home sales, fell 6 points this month, to 49.

A score of 50 or above marks a favorable outlook on home sales; A score below 50 indicates a negative outlook. Dietz also said that single-family permits are down 4% in the first half of 2022, compared with the first half of 2021.

The National Association of Realtors agrees. The organization informally defines a housing recession as six months of straight decline in home sales. NAR Chief Economist Lawrence Yun said sales in July fell by nearly 6% compared with the previous month, equating to almost 5 million units, marking the slowest sales pace since November 2015 – with the exception of a drop occurring at the start of the COVID-19 pandemic two years ago.

Additionally, NAR said home sales, including single-family homes, townhomes, condominiums, and co-ops, fell about 20% compared with July 2021, when the housing market was scorching.

On the verge of a collapse?

No, the housing market is not even close to the housing market crash during the 2008 Great Recession, experts agree. That’s in part because of new lending regulations resulting from the meltdown.

Borrowers are in much better shape, with higher credit scores. And with home prices still up, homeowners have a record amount of equity.

“This is a pretty complicated web that’s happening right now, but it’s nothing like the crash in 2008 and 2009 that took years for the market to unwind,” said Phillips, of Houwzer.

Los Angeles real estate investment adviser André Stewart, CEO of InvestFar, a startup, believes Federal Reserve chair Jerome Powell is far from finished playing a key role in the housing market’s future.

“The Fed also has a $2.7 trillion mortgage dilemma, combined with high-interest rates, it’s very unlikely the Federal Reserve can unwind its balance sheet,” Stewart said. “But if they do, prepare for a collapse, not a correction, in housing over the next 18 to 24 months.”

Copyright 2022, USATODAY.com, USA TODAY

Judge Tosses Challenge to Part of Insurance Law

 By Jim Saunders

Contractors challenged an assignment of benefits (AOB) change passed in May by the Florida Legislature, but the judge said people named aren’t “proper defendants.”

TALLAHASSEE, Florida – A Leon County circuit judge has rejected a challenge by contractors to part of a new property-insurance law that restricted attorney fees in insurance disputes.

Judge J. Lee Marsh issued an order Monday dismissing a constitutional challenge filed in May by the Restoration Association of Florida and Air Quality Assessors, LLC, an Orlando firm that does work such as mold testing and leak detection.

The challenge targeted part of a law passed during a May special legislative session that Gov. Ron DeSantis called to address massive problems in Florida’s property-insurance market. The lawsuit named as defendants Melanie Griffin, secretary of the Florida Department of Business and Professional Regulation, and Donald Shaw, executive director of the state Construction Industry Licensing Board, because they have disciplinary and regulatory authority over contractors.

Marsh’s order did not directly address the constitutionality of the law but dismissed the case because he said Griffin and Shaw were not “proper defendants,” in part because they were not in charge of enforcing the law.

The insurance industry has long blamed litigation and attorney fees for driving up costs. The new law took a series of steps to try to address those issues, but this court challenge focused on part of the measure that deals with “assignment of benefits” (AOB).

In assignment of benefits, homeowners sign over their insurance claims to contractors, who then seek payment from insurance companies – often spurring lawsuits about claims and payments.

In the past, contractors could recover their attorney fees from insurers if they were successful in the lawsuits, a concept known as “prevailing party fees.” But the new law (SB 2-D) stopped contractors from being able to recover prevailing-party fees if AOB. Homeowners can still recover prevailing-party fees if they file lawsuits directly, but contractors cannot.

The lawsuit alleged that the change violates equal-protection and due-process rights and denies contractors access to courts.

“When the insurer delays, underpays or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed,” attorneys for the Restoration Association of Florida and Air Quality Assessors wrote in an Aug. 4 response to the state’s motion to dismiss the case. “Without the corresponding right to recover attorneys’ fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court, and thus effectively voids the AOB (assignment of benefits), leaving the assignee (the contractor) holding the bag.”

But in seeking a dismissal, the state’s attorneys focused on issues such as whether Griffin and Shaw were proper defendants. In the July 13 motion to dismiss, for example, the attorneys wrote that the law “does not charge the secretary or the executive director with enforcing its provisions” and does not implicate their “specific responsibilities.”

“In other words, do the secretary or executive director have specific responsibilities relating to property insurance or awarding attorney’s fees in insurance litigation? They clearly do not,” the state’s attorneys wrote.

As an indication of the interest in the lawsuit, state-backed Citizens Property Insurance Corp., Security First Insurance Co., Tower Hill Signature Insurance Co. and US Coastal Property & Casualty Insurance Co. formally intervened to help defend the law.

The Restoration Association of Florida and Florida Premier Roofing LLC also have a challenge pending in Leon County circuit court to another law (SB 4-D) passed during the special session.

Florida’s property-insurance market has been in upheaval as insurers have dropped customers and sought huge rate increases because of financial losses. Five property insurers have been declared insolvent since February, and policies have poured into Citizens, which was created by the state as an insurer of last resort.

© 2022 The News Service of Florida. All rights reserved.

Vacation Home Market with the Best Returns on Investment? Greater Miami

 By Veronika Bondarenko

The U.S. has 1.1 million vacation rental properties and while investors seeking top returns often focus on tourist destinations, some smaller unexpected cities also work.

NEW YORK – While the old adage about location and real estate may be changing for those who work remotely, it has never been more true for those who rent out vacation properties – a home steps from South Beach or a West Hollywood condo can bring in hundreds of thousands of dollars a year as a rental.

That is, of course, the top end of the range. There are, at the moment, over 1.1 million vacation properties being rented out across the U.S, and for many it is a steady but modest source of supplementary income.

A recent study by rental research company AirDNA found that, at the end of 2021, an average vacation home generated $56,000 a year in profit after all expenses.

But in terms of where it is best to invest, a recent round-up by LawnStarter found that Miami was by far the most profitable city to own a vacation home. Out of the 190 biggest markets in the country, it had the best ratio of ROI (return on investment), the initial investment needed to obtain a place.

Where should I buy vacation property?

Despite the fact that rentals of less than 30 days are not permitted in the city, New York still ranked as the highest most profitable place in the country to be in this business. Due to a decades-long shortage of both long-term and short-term housing, a place that’s put up for two or three months will still get snapped up very fast.

Six out of the top ten cities on the list were in the South.

“Although they aren’t your typical vacation hotspots, nightly rates are competitive here,” the study’s authors write. “Host expenses in Augusta are particularly low, putting more money back in your pocket, but Tampa and Knoxville are relatively safer for tourists.”

California, meanwhile, filled out the bottom of the list with seven of the spots. But while Los Angeles was relatively high at 24 out of 190, Fremont, Sunnyvale, and San Jose were the three worst cities to rent out a vacation home in the country.

What’s the ROI (and what will I have to spend)?

Reasons for this range from everything from being suburban and too far away from any tourist destinations to, in the case of San Jose, low safety ratings.

Many of the cities to place at the bottom of the round-up also ranked low in the number of attractions. While New York, Los Angeles, and Chicago predictably topped in that regard, California’s Modesto and San Bernardino had the lowest.

“Invest in a property within Miami, Boston, New Orleans, and Los Angeles, and you’d be almost guaranteed to see money roll in,” reads the study. “Many tourists imagine staying in a seaside (or near-water) retreat for their holidays, so it’s no surprise that these cities would haul in the biggest returns from their short-term lets.”

Texas’s Irving and California’s Lancaster had the highest average housekeeping costs, while Cleveland in Ohio and Bridgeport in Connecticut had the lowest. Rental occupancy rates were highest in Garland, Texas, and Fresno, California, while Lakewood in Colorado and Garden Grove in California had the largest number of empty vacation listings.

© Copyright 2022 Jackson Progress-Argus. All rights reserved.

Some Insurers Dropping Owners Who Install Solar Panels

 By Ron Hurtibise

Homeowners adding solar panels study energy savings and break-even costs, but they should also call their insurer: Some increase premiums and some cancel policies.

FORT LAUDERDALE, Fla. – As electric bills surge and the federal government offers generous tax incentives for renewable energy investments, more and more Florida homeowners are seriously considering rooftop solar systems.

But in calculating system costs vs. electric bill savings, many would-be solar owners are neglecting to consider how a solar system will affect their home insurance bill – or how difficult it might be to find a company that will insure them at all.

And with insurance premiums skyrocketing for all Florida homeowners, solar customers who can obtain coverage might also find that the price increase will wipe out any energy-cost savings they expected from going solar.

“It’s a big deal and a lot of folks don’t realize that many carriers don’t accept solar panels,” says Dulce Suarez-Resnick, vice president at the Miami-based agency Acentria Insurance.

Oakland Park homeowner Holy Strawbridge learned this the hard way. She installed a modest 8,000 kilowatt system atop her home about two years ago and recently signed up for coverage with Edison Insurance Company. After the insurer sent an inspector to her home, she received a letter canceling her entire policy.

“I was shocked,” Strawbridge said. “I’ve never filed an insurance claim and I’ve lived in this house since 2001.”

The reasons cited in the cancellation letter sent by Edison: Her solar panels are ineligible for coverage due to the age of her roof (11 years) and because she has a tile roof.

Those aren’t the only reasons insurers won’t cover rooftop solar systems, according to interviews with solar installers, solar energy advocates, and insurance agents. Insurers who do business in Florida offer a wide variety of reasons for refusing to insure homes with them.

Net metering flagged by insurers

Increasingly, insurers are claiming that solar systems with net metering connections to utilities – which is virtually all of them in Florida – pose a unique risk of injury to line workers and damage to the utility grid.

Florida Power & Light’s net metering contract requires homeowners to take responsibility for all potential damages, says Ryan Papy, president of Palmetto Bay-based Keyes Insurance. “So if there’s a surge running through your panels that causes damage to the grid or other homes, the client is responsible.”

Solar installers and advocates call that justification unfounded. They say all equipment used to connect rooftop solar systems to the grid comply with state building and electrical codes and are inspected by utilities before new systems are activated. Utilities also have authority to come onto solar owners’ properties and disconnect them if they suspect any safety issues, they say.

Solar advocates wonder if the net metering concerns are just excuse insurers are giving to justify dropping customers.

Many insurers who operate in Florida, faced with mounting losses, have been dropping or nonrenewing policies to reduce the amount of overall risk they carry on their books of business. In some cases, state insurance regulators have ordered insurers to shed policies so they can afford to purchase reinsurance – insurance that insurers must carry to be able to pay all claims after a catastrophe.

Justin Hoysradt, president of Vinyasun, a solar installation company based in West Palm Beach, says the potential dangers of backfeeding are exaggerated. Since 2006, all power-producing inverters have complied with an electrical standard called U.L. 1741, Hoysradt said. This standard requires solar system inverters to be able to detect utility outages or any odd voltage disruption and automatically disconnect the solar systems from the grid.

Hoysradt says he is unaware of any documented instance of injury or damage from a properly installed UL 1741-certified inverter. The cut-off technology is so dependable that utilities recently removed a requirement that solar systems be equipped with separate redundant manual lockable disconnects, he said.

Until about a year ago, Hoysradt rarely heard customers complain that they couldn’t find or keep insurance because of their solar systems. Now, at least one potential customer a day says their insurer could not guarantee they wouldn’t be dropped if they install solar, he said.

Other insurers have told homeowners that net metering turns them into commercial utilities and they are no longer eligible for homeowner insurance policies, said Heaven Campbell, Florida program directors for Solar United Neighbors, a nationwide nonprofit that helps solar customers form co-ops to secure better pricing. Campbell says her organization has documented about 60 homeowner complaints over the past year. They either say they’ve been cancelled after installing solar panels or told they would no longer be eligible for coverage if they install panels, she said.

Insurer cites numerous concerns

Olympus Insurance laid out an extensive list of concerns about property and liability exposures in a 2020 filing with the Office of Insurance Regulation, while seeking approval to exclude solar systems from the risks it must cover. They included increased exposure for damage due to wind uplift when solar panels are attached to a roof, increased exposure for wind or hail damage to the solar system itself, fire hazards from loose or poorly connected parts or wires, increased risk or electrocution, presence of toxic materials and byproducts of the panels themselves, and potential liability associated with backfeeding to the grid.

Without commenting on the validity of the concerns, the Office of Insurance Regulation told Olympus it could not allow a broad mandatory exclusion for coverage of solar unless the company provided an option for solar owners to “buy back” the coverage at an increased price. Olympus withdrew the filing. It could not be immediately determined from the office’s filing database whether the company resubmitted it with the buy-back option.

Campbell disputes claims that rooftop solar systems make roofs more susceptible to wind uplift during hurricanes. She said after Hurricane Michael struck the Panhandle in October 2018, many roofs with solar panels remained intact amid roofs without solar panels that were destroyed.

Solar United Neighbors’ website contains numerous photos of installations that held up in storms that damaged roofs of surrounding homes. Campbell says modern building codes actually make roofs with solar panels better able to withstand winds.

Paul Handerhan, president of the consumer focused Federal Association for Insurance Reform, said concerns about wind uplift stem from the potential for increased damage if solar panels and roofs are torn from homes together.

Suarez-Resnick concurs: “With stronger winds like a Category 3 hurricane, you might have much more damage if panels go flying and land on your neighbor’s roof or car.”

Companies that do insure rooftop solar systems are allowed to set strict conditions for that coverage, filings show.

Edison, the company that cancelled Strawbridge’s policy, will only cover homes with solar systems that were installed after 2016, on shingle or metal roofs no older than 10 years, on flat roofs no older than five years, and produce no more 10 kilowatts of electricity, which is more or less the typical rooftop system capacity.

As Strawbridge found out, Edison will not insure solar systems mounted on clay or tile roofs. Stacey Giulianti, chief legal officer at Florida Peninsula Insurance Company, parent company of Edison, said, “We chose not to insure solar panels on tile roof homes due to the challenges presented by the attachment of the panels to the roofs. Most tile roof installations require attachment brackets which must pierce the tile roofs.”

Solar panels are routinely installed without piercing tiles, Hoysradt said. Many installers remove clay tiles at the point where solar posts attach to the roof and replace them with aluminum tiles that won’t break or crack when drilled.

Hoysradt noted that state licensing requirements for solar installers require knowledge of roofing, electrical and plumbing construction. “We’re not just a bunch of people taking roofs apart with no experience,” he said. “There’s no reason for insurance carriers to not cover solar on a tile roof.”

Nevertheless, rooftop solar consumers can expect to find a hodgepodge of insurance rules unless and until the state Legislature decides to enact common coverage standards.

Common standards for insuring solar?

The national trade organization Solar Energy Industries Association is working with fellow solar advocacy groups Florida SEIA, Solar United Neighbors and Vote Solar to reach out to insurers and try to develop legislation to eliminate confusion about insurance practices, said Will Giese, the association’s Southeast regional director.

The good news for Strawbridge and other solar owners is there are insurers that do not prohibit coverage of homes with solar systems or impose a long list of restrictions on coverage. They include state-owned Citizens Property Insurance Corp., the so-called “insurer of last resort.”

Citizens covers solar systems as part of the structure. No special endorsements or add-ons are required, spokesman Michael Peltier said. “They would just be added into the replacement value of the home,” he said. Of course, adding solar panels increases the value of a home, so homeowners can expect to pay a higher premium when they add solar.

One mistake a homeowner should never make: Installing a solar system without checking insurance options, Suarez-Resnick said. An agent can tell you whether your roof is nearing the end of its life and should be replaced first. It’s a pain to find new insurance, and it’s costly to remove and replace solar panels because Citizens or another insurer demands that you get a new roof.

Or you might look for a solar installer, like Universal Contracting and Solar, that specializes in bundling roof replacements and solar installations. You can get long-term financing and qualify for the 30% federal tax credit to offset cost of the combined job, says Jenifer Kempka, the company’s director of business development.

“Right now is the best time to go solar,” she said.

© 2022 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.

FHFA: U.S. 2nd Quarter Prices Up 17.7% – But Over 26% in Florida

 By Kerry Smith

Of 100 metros tracked by government-backed mortgages, 8 Fla. cities hold top-11 spots, with Sarasota-Bradenton (up 36.5%) and Cape Coral-Fort Myers (36.0%) at the top.

WASHINGTON – It’s hard to underestimate the strength of Florida’s current home price increases in the second quarter of 2022 based on the Federal Housing Finance Agency House Price Index (FHFA HPI).

Index scores are based on mortgages – more than half of all in the U.S. – backed by Fannie Mae and Freddie Mac.

Of the 100 cities the index tracks, almost all Florida metros anchored the top 10 for year-over-year price increases, including two metros in the first and second spots. Only one Florida city, Miami-Miami Beach-Kendall, didn’t make the top 10, and it was No. 11.

Overall U.S. house prices rose 17.7% year-to-year in the second quarter (4.0% quarter-to-quarter), but no Florida metro area had an increase less than 26%.

Top 100 rank of Florida metros and year-to-year price increase

1. North Port-Sarasota-Bradenton: 36.5%

2. Cape Coral-Fort Myers: 36.0%

4. Tampa-St. Petersburg-Clearwater: 29.6%

5. Jacksonville: 29.0%

8. Fort Lauderdale-Pompano Beach-Sunrise: 26.9%

9. West Palm Beach-Boa Raton-Boynton Beach: 26.4%

10. Orlando-Kissimmee-Sanford: 26.3%

11. Miami-Miami Beach-Kendall: 26.1%

Overall, however, the nation started seeing a slowdown in the rate of home-price increases.

“Housing prices grew quickly through most of the second quarter of 2022, but a deceleration has appeared in the June monthly data” says William Doerner, Ph.D., supervisory economist in FHFA’s Division of Research and Statistics. “The pace of growth has subsided recently, which is consistent with other recent housing data.”

Other 2Q findings

• U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.
• House prices rose in all 50 states and the District of Columbia year-to-year. The five areas with the highest annual appreciation were: Florida 29.8%, Arizona 25.5%, North Carolina 25.2%, Montana 24.9% and Tennessee 24.3%
• The areas with the lowest annual appreciation were the District of Columbia 5.2%, North Dakota 10.6%, Louisiana 10.8%, Minnesota 11.3% and Maryland 12.0%.
• House prices rose in all of the top 100 largest metropolitan areas over the last four quarters greatest in North Port-Sarasota-Bradenton (up 36.4%) and weakest in Washington-Arlington-Alexandria (up 9.1%).

© 2022 Florida Realtors®

Buyers Skittish? For Many, It’s Just Market Weirdness

 By Swapna Venugopal Ramaswamy

Rising prices and mortgage rates deter homebuyers, but for many, the rapid changes are simply disconcerting. It makes them wonder what will happen next.

NEW YORK – In just six months, Sam Brinton, a real estate agent in Salt Lake City, has witnessed a complete reversal in buyer sentiment.

“It’s a night and day difference,” he says.

Last year, even as the pandemic housing market pushed home prices ever higher and bidding wars were an expected part of the home buying process, buyers were motivated enough to stay in the game.

The last few months have been the opposite.

“They are confused and hesitant now. Many buyers are sitting on the sidelines because the market has cooled down so much,” says Brinton. The cooling housing market has further fueled the demand for rental units, driving rental prices even higher.

Why are people thinking about renting?

It’s been a nerve-wracking time for homebuyers grappling with still-soaring prices for existing homes despite rising inventory, falling home sales and volatile interest rates.

The average 30-year fixed mortgage rate went from 3.22% on Jan. 6 to 5.55% on Aug. 25, according to Freddie Mac. Existing home sales fell for the sixth consecutive month with sales down 6% from June and 20% from one year ago.

The wait-and-watch approach by buyers is prompting a high share of home sellers to drop their asking price. More than 15% of home sellers dropped their asking price in the 97 largest U.S. metropolitan areas, according to a report from Redfin.

In pandemic boomtowns, it was much more drastic.

In Salt Lake City, for instance, 56% of homes for sale had a price drop in July. Nearly 70% of homes for sale in Boise, Idaho, had a price drop in July, the highest share of the 97 metros.

“Last year, the market forces pushed you into a home and pushed you into doing it sooner than you wanted. It was like ‘now, now, now, high, high, high,’” says Brinton. “Whereas now the market forces are pulling you away. Even someone who’s ready to go is kind of dragging their feet.”

The median existing home sales price climbed 11% from one year ago to $403,800 in July, marking 125 consecutive months of year-over-year increases. However, it was down by $10,000 from June’s record high of $413, 800, according to National Association of Realtors data.

Should you buy or rent?

The median monthly asking rent in the U.S. surpassed $2,000 for the first time in May, rising 15% year-over-year to a record high of $2,002. Asking rents were up over 30% in Cincinnati, Seattle, and Nashville, Tennessee, and nearly 50% in Austin, Texas.

In July, the national median asking rent was up 14% year-over-year to $2,032.

“Rent prices have gone up in the last 18 months, much faster than any other time in recent history,” says housing analyst Logan Mohtashami. “So the question is, ‘Can you tolerate the rent increases on a yearly basis?’”

With a home purchase, even at a higher interest rate, a buyer is opting for a fixed payment plan, says Mohtashami. And if mortgage rates go down next year, homebuyers have the option to refinance.

“It’s a savagely unhealthy housing market in the sense that mortgage rates have gone up so much and home prices are still rising,” he says. “So there’s a lot of people who just simply can’t afford to buy a house after this year, so they’re going to be renting no matter what.”

Brinton says a client who is relocating from Maine to Salt Lake City spent a few weeks looking for a home before deciding to explore the rental market. A few weeks later, she was back, wanting to resume her house hunting.

“She realized that (renting) was an expensive option,” says Brinton. “Rental prices are so high here and they are only going higher as more and more people have dropped out due to interest rates.”

While nationally it is still more expensive in terms of monthly payments (assuming a 5% down payment) to buy ($2,316) than rent ($2,016), in some markets, such as Fort Lauderdale and Miami in Florida, Cincinnati, Detroit, and Boston, it is now cheaper to buy a home than to rent.

The downside of waiting to buy a home is that you’ll have to sign a lease if you need a place to stay and it’s not a second home, says Daryl Fairweather, chief economist at Redfin.

“And that lease is going to be expensive. A lot of these would-be homebuyers are turning to the rental market and that’s sustaining demand on the rental side,” she says. “Even as people’s budgets are pinched by higher inflation and higher interest rates.”

Are we in a housing recession?

For new home construction, yes, according to the experts. Rising mortgage rates and higher costs of construction are causing a “housing recession,” says Robert Dietz, the chief economist at the National Home Builders Association.

Builder confidence fell for eight straight months in August as elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges, according to a association’s survey.

Nearly 1 in 5 home builders reported reducing prices by roughly 5% in the past month to increase sales or limit cancellations. New home sales were nearly 30% lower in July compared with July of last year.

For existing homes, including single-family homes, townhomes, condominiums, and co-ops, sales fell 20% year-over-year in July, according to the National Association of Realtors. While all four major U.S. regions experienced year-over-year sales declines, the northeast region saw an uptick in month-over-month sales.

Buyers also have more to choose from, with unsold inventory now at a 3.3-month supply, up from 3 months in June and 2.5 months in June 2021. Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.

“The national inventory level is still below 2019 levels, and so another wave of lowered mortgage rates could keep the home price growth in the high single digits,” says Mohtashami.

If you plan on living in your new home for two years or less, it is better to rent, says Lawrence Yun, the chief economist for the National Association of Realtors. If it’s more than five years, it makes sense to buy.

“If you financially qualify for a house in the neighborhood you want to live in, it’s a good idea to buy,” he says. “The chance of a price decline is probably minimal, but if it does occur, it’ll be only for a short duration. But if you don’t buy, you are just paying rent and then higher rent then further higher rent with each passing year and one could potentially miss out on the price gains.”

Buying? Plan for ‘long game’

Scott Golub and his wife, Annmarie, recently confronted that decision. The couple is moving from their apartment in Queens to their new home in Pleasantville, New York, this week.

After having spent more than a year looking for homes in the area, and losing out on multiple homes, the couple, who has a 4-year-old daughter and another child on the way, found a home that was close to schools, easily accessible to the downtown, and had a good-sized yard. After being outbid more than three times over the past year, they made an all-cash offer, with help from Annmarie’s parents. The couple paid $940,000, or $90,000 above the asking price for the 2,300-square-foot home listed at $850,000.

“The house hit every box we wanted,” he says. “We didn’t want to take a chance on losing out on it,” he says.

Natalia Wixom, Golub’s agent says the couple had done their homework and were confident buyers.

In the coming months, with rising inventory, sellers will have to prepare homes better and price them more carefully, says Wixom.

Asked if he was worried about the softening housing market, Golub said it wasn’t a concern.

“Obviously, we don’t want to lose value on the house, but this is a house that we plan on being 30 years plus,” he says. “So it’s kind of a long game.”

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