Buyer Stress Worse than Dating – and Potty Training

 By Kerry Smith

Study: What’s more stressful than buying a new home? 

SEATTLE – Nearly two-thirds of recent U.S. homebuyers (59%) think purchasing a house is more stressful than dating, according to a report from Qualtrics commissioned by Redfin covering May-June, 2023.

“Getting ghosted by your date is stressful, but purchasing a home in today’s market comes with its own unique set of anxieties,” says Redfin Chief Economist Daryl Fairweather. “Buyers are increasingly ghosting sellers as housing costs climb, and high mortgage rates are prompting many homeowners to stay put instead of selling – meaning house hunters have a record low number of homes to swipe right on.”

Of the life events respondents had to choose from, respondents found only two more nerve-wracking than buying a home: 57% said divorce and 56% said finding a new job.

The results don’t necessarily apply to other real estate markets. With higher mortgage rates and fewer homes to choose from, more people moving in 2023 were doing so out of need rather than desire, often tied to a major life event, such as a divorce or new job. One in 10 home sellers say they’re moving because of a return-to-office policy.

Age, race affect home buying stress

• Millennials and Gen Z buyers were more likely to see homebuying as stressful – baby boomers and Gen X not as much. Baby boomers, at least, largely have a stronger financial position than the rest since they’ve been building home equity for years. In fact, boomers recently overtook millennials as a total percentage of homebuyers.
• Older generations were most likely to emphasize the stress of divorce; 67% of boomers said divorce is more stressful than homebuying, compared with 61% of millennials and 48% of Gen Z respondents.
• More than two-thirds of white respondents (64%) said buying a home is more stressful than getting into college – but that was flipped for Black respondents, with 57% saying “getting into college” is more stressful.
• Roughly one-quarter of Black adults say they carry student loan debt, compared with 14% of white adults.

© 2023 Florida Realtors®

Don't expect major legislation on property insurance in 2024

 Florida Senator on Insurance: ‘We Got a Lot Done’

By Jim Saunders

Lawmakers think recently enacted insurance changes will help but need more time to work.

TALLAHASSEE, Fla. – A key senator said Tuesday he does not expect lawmakers to make major property-insurance changes during the 2024 legislative session, as they continue to watch the results of an overhaul passed last year.

“In my opinion, we swung for the fences, and we got a lot done,” Senate Banking and Insurance Chairman Jim Boyd, R-Bradenton, said after his committee received updates about the property-insurance market from state Insurance Commissioner Michael Yaworsky and Citizens Property Insurance President and CEO Tim Cerio.

Boyd said he doesn’t see “any additional big-deal things that we can do” during the 2024 session, while giving time for the changes passed last year to play out. The 2024 session will start in January.

Troubles in the property-insurance market during the past three years have led to many homeowners facing massive rate increases or losing coverage, and have spurred a flood of policies into Citizens, which was created as the state’s insurer of last resort. Citizens ended last week with 1.412 million policies, nearly double the 708,919 policies it had on Sept. 30, 2021.

Lawmakers during a special session in December passed wide-ranging changes to try to shore up the market. For example, they tried to shield property insurers from costly lawsuits and took steps to help push policies from Citizens into the private market.

At the time, lawmakers said the changes would likely take 12 to 18 months to filter through the system. Since December, property owners have continued to see increased rates and, in many cases, few choices for coverage.

But Boyd, Yaworsky and Cerio said they see signs of improvement in the industry.

“Everyone is in this together,” Yaworsky told reporters after his presentation to the Banking and Insurance Committee. “It is a very difficult time for Florida homeowners, but the state has enacted significant legislation to address that after years of trying to get it done.”

Yaworsky said, for example, the costs of reinsurance – critical backup insurance that drives a large chunk of homeowners’ bills – did not increase as much as initially feared.

Also, regulators have approved requests from private insurers to take as many as 646,617 policies from Citizens this year. While only a portion of those policies will go into the private market, Yaworsky said the interest in so-called “depopulation” of Citizens is a sign of a healthier market.

Cerio said Citizens had expected it could end 2023 with 1.5 million to 1.7 million policies. But he said it now expects to end the year with about 1.3 million policies.

During the committee meeting, however, concerns about the market remained apparent.

For example, Senate Rules Chairwoman Debbie Mayfield, R-Indialantic, said the majority of calls she gets in her office are related to property insurance. At least some of those concerns involve a lack of competition and coverage choices.

“I can tell you it (coverage) has been shopped, and you can’t find it,” Mayfield said.

Sen. Victor Torres, D-Orlando, asked Yaworsky whether the state would consider a cap on rate increases over the next few years or a moratorium on policies being dropped.

But Yaworsky said a rate cap could lead to some Florida-focused insurers leaving the market or going insolvent. Cerio also said lower rates for Citizens could be a “long way off” because the insurer’s rates are below where they should be.

© 2023 The News Service of Florida. All rights reserved; see terms. News Service broadcast journalist Mike Exline contributed to this report.

U.S. Isn’t Ready for Boomers to Age in Place

 By Kerry Smith

Census Bureau survey: There’s a disconnect between perception and reality. While many older adults think they can “age in place,” their homes aren’t outfitted to do so.

WASHINGTON – A survey by U.S. Census Bureau took a look a housing and older adults. While the nation largely focuses on millennial and Gen Z buyers stuck in a difficult housing market, the Census study analyzed old adults’ housing needs.

It identified 37 million older-adult households in the U.S., and 1 in 10 (11%) of them face some kind of difficulty living in their current home – a number that rises to 24% for the oldest adults.

The report, Aging-Ready Homes in the United States–Perception Versus Reality of Aging-Accessibility Needs: 2019, found that home accessibility varied by region. Older households in the South Atlantic division – an area that includes Florida – were more likely to report critical difficulty compared with the national average. And older households in New England and the West North Central divisions were less likely to do so.

There’s also a breakdown in homeowner perceptions, according to the report, with many owners saying their home is equipped for contented aging in place. However, they also reported some basic features missing, such as a step-free entryway and a bedroom and full bathroom on the first floor.

In many cases, older adults have little choice: Many cannot afford to upgrade their homes to make it easier to age in place, particularly where the stock of homes is old and requires more extensive renovations, such as in the Northeast.

The Census Bureau concludes by saying that the U.S. has a need for more aging-in-place homes over the next few decades. “Given the risks and long-term consequences of fall-related injuries, it is economically and health-imperative to consider the ability of older adults to age safely and comfortably in their homes,” it says.

© 2023 Florida Realtors®

Mortgage Rates Hit 7.31% – a 23-Year High

 By Alex Veiga

Last week, a 30-year, fixed-rate loan averaged 7.19%; a year ago, it was 6.70%. The last time rates were this high was in 2000 when home values weren’t going up.

LOS ANGELES (AP) – Home loan borrowing costs climbed again this week, pushing the average long-term U.S. mortgage rate to its highest level in nearly 23 years, another blow to prospective homebuyers facing an increasingly unaffordable housing market.

The average rate on the benchmark 30-year home loan rose to 7.31% from 7.19% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.70%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loan, also increased. The average rate rose to 6.72% from 6.54% last week. A year ago, it averaged 5.96%, Freddie Mac said.

“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” said Sam Khater, Freddie Mac’s chief economist. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”

High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in rock-bottom rates two years ago from selling. The average rate on a 30-year mortgage is now more than double what it was two years ago, when it was just 3.01%.

The combination of elevated rates and low home inventory has worsened the affordability crunch by keeping home prices near all-time highs even as sales of previously occupied U.S. homes have fallen 21% through the first eight months of this year versus the same stretch in 2022.

This is the third consecutive week that mortgage rates have moved higher. The weekly average rate on a 30-year mortgage has remained above 7% since mid-August and is now at the highest level since mid-December 2000, when it averaged 7.42%.

Mortgage rates have been climbing along with the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield has surged in recent weeks amid worries that the Federal Reserve will keep short-term interest rates higher longer to fight inflation.

The central bank has already pulled its main interest rate to the highest level since 2001 in hopes of extinguishing high inflation, and it indicated last week it may cut rates by less next year than earlier expected.

The threat of higher rates for longer has pushed Treasury yields to heights unseen in more than a decade. The yield on the 10-year Treasury was at 4.61% in midday trading Wednesday. It was at roughly 3.50% in May and just 0.50% early in the pandemic.

While mortgage rates don’t necessarily mirror the Fed’s rate increases, they tend to track the yield on the 10-year Treasury note. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can influence rates on home loans.

Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

2022 borrowers paid 22% more in closing costs; average monthly mortgage payments rose 46%

 By Kerry Smith

2022 borrowers paid 22% more in closing costs, largely paying points to snag a lower interest rate. Even so, average monthly mortgage payments rose 46%.

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) released its annual report on residential mortgage lending, the 2022 Mortgage Market Activity and Trends. Overall, 2022 saw a marked decline year-to-year in mortgage applications and originations – but rates, fees, discount points and other costs increased.

“The higher interest rate environment had profound effects on the mortgage market in 2022, with borrowers paying much more in monthly payments,” says CFPB Director Rohit Chopra. “These trends are likely to continue given further increases in interest rates in 2023.”

Key findings from the 2022 analysis

• Borrowers paid a lot more in costs and fees – 22% more compared to 2021 for an average $5,954. A higher percentage of borrowers (50.2%) paid discount points, up from 32.1% in 2021. The average cost of those discount points was $2,370.
• Cash-out refinances are back. However, refinances dropped, CFPB says. In 2021, the number of refinances was 8.3 million; in 2022, they dropped to 2.2 million in 2022, a 73.2% reduction.
• Most cash-out refinances were originated by independent lenders. Since a cash-out refinance lowers equity, CFPB sees that as a red flag for foreclosure since they usually result in higher interest rates, higher monthly payments and higher balances than other refinances.
• Home-equity lines of credit rose: Though a smaller part of all refinance loans, home-equity lines of credit (HELOCs) were the only type of refinancing to increase year-to-year in 2022. And, unlike other types of refinancing, traditional lenders originated most HELOCs rather than independent lenders. CFPB sees HELOCs as a less risky option since they tend to have lower interest rates and monthly payments than cash-out refinances.
• Average monthly mortgage payments increased more than 46%: The average monthly payment for borrowers taking out a conventional conforming 30-year fixed-rate mortgage (excluding taxes and insurance) rose from $1,400 in December 2021 to $2,045 in December 2022 – a 46.1% increase.
• Hispanic and Black borrowers experienced worse outcomes: They had a higher loan denial rate, received smaller loans and were charged higher interest rates. They also paid more in upfront fees than white and Asian borrowers. In 2022, for example, the median interest rate for Black and Hispanic borrowers was above 5%, while the median rate was below 5% for white and Asian borrowers.
• Lenders increasingly denied applicants based on insufficient income: More than 50% of mortgage denials for Asian applicants were due to insufficient income. The same was true for around 45% of denials for Black and Hispanic applicants, and around 40% for white applicants. Denials due to insufficient income were below 40% for all four groups in 2018.

© 2023 Florida Realtors®

U.S. August New-Home Sales Down 8.7% as Interest Rates Rise

 By Kerry Smith

Rising interest rates not only make homes more expensive for buyers, they raise the cost of building materials.

WASHINGTON – Mortgage rates and affordability challenges pushed new-home sales lower in August, to their weakest rate since March.

August sales of newly built, single-family homes fell 8.7% to a 675,000 seasonally adjusted annual rate from an upwardly revised reading in July, according to data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Year-to-year, however, the pace of new home sales was up 5.8%.

“Higher interest rates price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB).

NAHB Chief Economist Robert Dietz says August mortgage rates above 7% had an impact.

“While some builders were able to offset that effect via mortgage rate buydowns, rates moved higher this month, suggesting the pace of new home sales will weaken further” once September data comes out, he says.

A new home sale occurs when a sales contract is signed or a deposit accepted. The home can be in any stage of construction: not yet started, under construction or completed. After adjusting for seasonal effects, the August reading of 675,000 units is the number of homes that would sell if August’s pace continued for the next 12 months.

Inventory and prices

New single-family home inventory in August was 436,000, down 5.2% compared to a year ago, representing a 7.8-months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Of the total U.S. home inventory – both new and resale homes – newly built homes represent a higher-than-usual share at 31% of listings. And in August, almost 16% of all home sales were new homes.

“Builders are being more cautious about managing their inventory in this rising rate environment,” Dietz says. “A year ago, 10% of the new home inventory listed for sale consisted of homes that had not yet started construction. That share has now risen to 17% of the total inventory.”

The median new-home sale price in August was $430,300, down roughly 2% year-to-year. The price decline is due, in part, from builders using incentives plus a shift towards building slightly smaller homes.

Regionally, on a year-to-date basis, new home sales rose 4.8% in the Northeast, 4.4% in the Midwest and 1.9% in the South. In the West, new-home sales fell 0.5%.

© 2023 Florida Realtors®

U.S. Home Prices Keep Going Up, 4.6% Year-to-Year

 By Kerry Smith

The index that tracks Fannie Mae/Freddie Mac sales found a 0.8% month-to-month increase in July as housing prices continue to rise despite higher mortgage rates.

WASHINGTON – U.S. house prices rose up 0.8% month-to-month in July, according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted monthly House Price Index (HPI ). Year-to-year, house prices rose 4.6%. A previously reported 0.3% price increase in June was revised upward to a 0.4% increase.

The index breaks down the U.S. into nine census divisions, where price increases ranged from

A 0.1% increase in the East South-Central division to 8.1% higher in the New England division.

“U.S. house prices continued to appreciate in July, consistent with the trend observed over the last several months.” says Dr. Nataliya Polkovnichenko, supervisory economist in FHFA’s Division of Research and Statistics. “Regionally, all nine census divisions posted positive price appreciation over the last 12 months, although the Pacific and Mountain divisions experienced only modest growth.”

The FHFA HPI is a comprehensive collection of publicly available house price indexes that measure changes in single-family home values based on data that extend back to the mid-1970s. It includes data from all 50 states, over 400 American cities and tens of millions of home sales.

The flagship FHFA HPI uses seasonally adjusted, purchase-only data from Fannie Mae and Freddie Mac.

© 2023 Florida Realtors®