Will rate cuts unleash inventory and crash the market?

Posted on August 13, 2024 by grim

From Realtor.com:

Experts Predict What the Real Estate Market Will Look Like Once Mortgage Rates Drop

The high mortgage rates that have paralyzed America’s housing market are falling—and could nosedive further by the end of the year.

Rates for a 30-year fixed mortgage plunged to 6.47%—the lowest in over a year—for the week ending Aug. 8, according to Freddie Mac.

And with inflation losing steam and the economy cooling, expectations are high that the Federal Reserve could make not just one, but two rate cuts by the end of this year.

As a result, Realtor.com® senior economist Ralph McLaughlin expects mortgage rates to drop further in September and December, which is “encouraging news for potential homebuyers who have been waiting to participate in the market.”

This is also encouraging news for homeowners who might be thinking of selling. Is it time to finally list their property on the market? And if they do, what should they expect?
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A recent Realtor.com analysis found that 86% of homeowners have mortgage rates below 6%. Understandably, many feel “locked in,” unwilling to trade in their low rate for today’s higher ones if they sell and buy again.

“Home sellers have been sitting on the sidelines, not wanting to give up their COVID-era interest rates,” says Tan Tunador, vice president and senior loan officer with Atlantic Coast Mortgage.

But once rates drop further, that could change.

“The faster rates drop, the less homeowners will be held in place and we could see both new inventory and more sales,” says Danielle Hale, chief economist of Realtor.com.

“There are a significant number of sellers that couldn’t stomach—right or wrong—going from a 4% rate to a 7.5% rate,” says Mason Whitehead, a Dallas-based branch manager for Churchill Mortgage. “But they can stomach going from 4% to something in the 5% to 6% range.”

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 16 Comments

Chop chop chop

Posted on August 12, 2024 by grim

From Business Insider:

Buyers catch a break: Home prices just fell the most in 2 years

Homebuyers are finally starting to see the housing market shift in their favor, with home prices being slashed at the fastest pace in two years, according to Realtor.com.

The share of available listings that saw a price cut in July rose to 18.9%, up 3.4% compared with levels recorded in July last year. Those cuts have helped push down home prices across the country, with the median US home price dropping from $445,000 to $439,950 last month, the real-estate-listings site said in a recent report.

Price cuts have largely been driven by lower demand, alleviating some of the imbalances that pushed prices to record highs over the past year.

“First, rates remain higher than expected, which means there is less buyer activity,” Ralph McLaughlin, a senior economist at Realtor.com, said in a statement. “Second, the prospect of lower mortgage rates coming this fall may have induced some buyers to wait. This combo has led sellers to lower their prices in order to attract more buyers.”

The 30-year fixed mortgage rate dipped slightly last week, hovering around 6.7%. Buyers, though, are expecting rates to cool even more, especially as the Fed looks poised to cut interest rates in September.

Among the metro areas tracked by Realtor.com, 47 out of 50 saw the share of homes with price cuts increase year over year.

Cities in the Sun Belt appeared to dominate in the overall share of price cuts. Tampa, Florida, had the largest increase in price reductions over the past year, with 9.7% of homes on the market getting a cut in July. It was followed by Charlotte, North Carolina, and Phoenix, where 9.5% and 9.4% of homes on the market got a price cut, respectively.

Posted in Housing Bubble, Mortgages, National Real Estate, Price Reduced | 59 Comments

Does it need a comment?

Posted on August 11, 2024 by grim

From Mish:

A $150,000 House in 1988 Now Costs $707,500 Thank You Fed

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 31 Comments

That’s all you got?

Posted on August 9, 2024 by grim

From Jersey Digs:

Just Sold Alpine Mansion Sets New Jersey’s 2024 Price Record

A leafy suburb that regularly ranks as one of the most expensive zip codes in the country is unsurprisingly home to the year’s priciest home sale in the Garden State.

Last month, a $16.7 million sale was finalized for a sprawling 22,782 square foot estate in the Bergen County borough of Alpine. Built in 2004, the home sits on about four acres in the borough’s Rio Vista section and was listed for sale back in March for just under $20 million.

The impressive home, which boasts 12-foot ceilings across four levels accessible via an elevator, includes eight bedrooms, nine full bathrooms, and three half-baths. Totaling 25 rooms sporting a brick exterior with a slate roof, the home boasts high-end amenities like a bowling alley, home theater, a billiards room, plus a large wine cellar.
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The sellers purchased the mansion in 2013 for $13.375 million according to property records, meaning they took home a profit on the sale despite taking less than their original asking price. The home was listed by Rosemarie Campi with Prominent Properties Sotheby’s International Realty-Alpine.

The $16.7 million sales price seems to have bested the Garden State’s previous 2024 record. Another home in Alpine on Cambridge Way that sold for $8 million back in May after sitting on the market for years appears to be the previous record.

Posted in New Jersey Real Estate, Where's the Beef? | 147 Comments

New rules, nothing really changes

Posted on August 8, 2024 by grim

From NJ1015:

NJ changes home-buying rules: what this means for you

Some big changes to the process of buying or selling a home in New Jersey are now in effect.

The aim of the new rules, created through legislation that was signed by Gov. Phil Murphy in July, is to increase transparency for folks on both sides of the transaction.

“It definitely will benefit both parties — buyers and sellers,” said Gloria Monks, president of New Jersey Realtors.

The Real Estate Consumer Protection Enhancement Act went into effect on Aug. 1. The updates were floated in New Jersey after the National Association of Realtors agreed to a hefty settlement related to claims that the industry inflated real estate commissions.

Before a buyer is contractually obligated, the seller must provide a completed property condition disclosure statement.

This form would, ideally, inform a prospective buyer about structural issues and other major issues related to the home in question.

“Prior to the legislation, most sellers still completed it, but it was not a required form,” Monks said.

Before a wannabe buyer views a home with a real estate professional, an agreement needs to be signed between the two parties.

This is another system that had already been in place for many offices, but is now a requirement.

“This will spell out exactly what the agency is going to do for them, and how they’re going to be compensated,” Monks said.

At an open house, signage needs to explicitly disclose that the listing agent represents the seller.

“It’s for the buyer to see, so that they know that anything that they share with that agent is knowledge that the seller will find out,” Monks said.

Prospective buyers would still be able to form an agreement with the listing agent on site, given they don’t already have an agreement with another firm.

Posted in New Jersey Real Estate, Politics | 82 Comments

NJ #2 in price increases

Posted on August 7, 2024 by grim

From CoreLogic:

Home-price growth starting to cool: CoreLogic

Home prices continue to rise even as low inventory and high mortgage rates are keeping first-time and repeat homebuyers out of the market, but the pace of appreciation is starting to cool.

That’s according to CoreLogic’s Home Price Index report, released Tuesday, which shows that annualized home-price growth in June slipped below 5% for the second consecutive month. Prices rose 0.3% from May to June, which is less than half the average growth rate of 0.8% recorded during the same period prior to the COVID-19 pandemic.

“Housing market activity essentially froze at the end of the spring home-buying season as high mortgage rates continued to compress affordability and dissuade potential homebuyers,” CoreLogic chief economist Selma Hepp said in a statement. 

“In addition, cooling home prices continued to spread across more markets. The April surge in mortgage rates notably weighed on consumer sentiment, and consumers increasingly chose to respond to the anticipation of a lower mortgage rate environment later this year.”

Geographically, South Dakota posted the highest rate of year-over-year price growth at 10%. Behind the Mount Rushmore State were New Jersey (9.3%), Rhode Island (9.2%), Connecticut (8.5%) and New Hampshire (8.2%). At the opposite end of the spectrum, Texas and Louisiana each posted gains of less than 1%, while Oregon, Wyoming, Utah, Colorado, Minnesota and Arkansas posted gains of 1% to 3%.

At the metro level, Miami posted the highest annualized gain in June at 10%, followed by San Diego and Las Vegas at 7.5% and Chicago at 7.2%. Houston (1.7%) and Denver (1.9%) continue to grow at more sluggish rates.

Looking forward to July, the CoreLogic index forecasts slower growth of 0.3% month over month and 2.3% year over year.

Posted in Demographics, Economics, Housing Bubble, New Jersey Real Estate | 109 Comments

Housing the next big issue?

Posted on August 6, 2024 by grim

From Politico:

Priced out of housing, many younger disillusioned voters embrace populism

From California to Krakow, young voters who are losing faith in democracy have been spurred in part by a surprising cause: high rents and rising property prices.

The scarcity of affordable housing has triggered protests across European cities, from London to Lisbon, and on both coasts of the United States, where home prices have surged 54 percent since 2019. In California recently, hundreds of people, mostly renters, marched on the state capitol to decry the scarcity of reasonably priced rentals. In San Francisco, which has been so slow to approve new housing that a state law is forcing it to bypass some city regulations, the issue has fueled a rancorous debate in this year’s mayor’s race.

And across North America and Europe, the shortage is pushing voters, particularly younger ones, toward populist leaders who promise to address the problem by targeting an issue already key to their platforms — though not necessarily the main one driving the problem — increased immigration.

“If you can’t afford a place to live, you want to point fingers at someone, and incumbent politicians make an easy target — as do migrants,” Carbon Neutral Cities Alliance’s Michael Shank told POLITICO. “It’s a simple rhetorical flourish, but one that’s politically powerful and palatable to a public that’s understandably upset that they can’t find an affordable home.”

The link between housing and populism arises in large part because of the angst that can grow among those priced out of the market, research from David Adler and Ben Ansell suggests. While “some homeowners have gained massively” from rising house prices, they write, “housing market dynamics have created a map of winners and losers.”

Millennials and Gen Z are largely among the losers.

And for many of them, some centrist politicians worry the housing crunch is not only helping to nourish the rise of populism but also risks tarnishing the very idea of democracy. “If people think markets are rigged and a democracy isn’t listening to them, then you get — and this is the worrying thing to me — an increasing number of young people saying, ‘I don’t believe in democracy, I don’t believe in markets,’” Michael Gove, Britain’s housing minister, warned in February.

Indeed, opinion polls over the past few years have been consistently suggesting that millennials and Gen Z are much more disillusioned with democracy than Generation X or baby boomers were at the same life stage.

Posted in Crisis, Demographics, Economics, Housing Bubble, National Real Estate | 65 Comments

That was quick…

Posted on August 5, 2024 by grim

From CNBC:

Treasury yields tumble as recession concerns take hold 

U.S. Treasurys slid on Monday as fears about a recession grew after a series of key economic data was released last week.

At 4:10 a.m. ET, the yield on the 10-year Treasury was down by over four basis points to 3.7547%. The 2-year Treasury yield was last at 3.7807% after falling by more than nine basis points. The yield on both the 10-year and 2-year Treasurys on Monday fell to levels not seen in over a year.

On Friday, July’s nonfarm payrolls report showed that job growth for the month totaled just 114,000, which was below the 185,000 Dow Jones estimate as well as June’s revised figure of 179,000. The jobs report also showed that the employment rate unexpectedly rose to 4.3%, its highest level since October 2021.

The data suggested an easing of the labor market, which prompted concerns about a recession. That came after the Fed earlier in the week left interest rates unchanged and hinted at a September rate cut. But many investors have since questioned whether the central bank should have moved to cut rates already to ward off an economic downturn.

Markets are now pricing in an increasingly high chance of a 50 basis point rate cut when the Fed meets in September, CME Group’s FedWatch tool showed.

In the week ahead, investors will be watching out for comments from Fed officials, scanning them for clues about the economic and monetary policy outlook. ISM’s Services PMI, which tracks the performance of services companies, is also due Monday and is expected to rise from June’s 48.8 reading to 50.9 in July.

Posted in Economics, Employment, Housing Bubble, National Real Estate | 85 Comments

$775k in Garfield

Posted on August 2, 2024 by grim

From NJ.com:

This multi-family N.J. home had 35 offers and sold for $126K over asking

Home prices are getting out of reach, making multi-family homes a hot commodity.

So when a two family home in Garfiled hit the market, it had more than 20 showings a day, said Joe Charles of EXP Realty, the listing agent. 

“It was non-stop,” he said.

Within days he had 35 offers. It was listed for $649,000 and ultimately sold for $$775,000.

“Multi-family homes have such a larger buyer pool,” Charles said.
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Sales of two- to four-family houses in New Jersey increased 10% in 2023, according to the Otteau Group. At the same time, sales of single family homes declined 22%, according to New Jersey Realtors.

And multi-family homes are still experiencing a strong market in 2024. 

A two-family home in Essex Fells closed for $222,000 above asking price in April. 

Another in Clifton sold for $140,001 above asking price in March. 

“Multi-family homes are just going to sell and sell well,” Charles said.

Posted in Housing Bubble, New Jersey Real Estate | 193 Comments

NY Metro tops the S&P Case Shiller in May

Posted on July 31, 2024 by grim

From the NY Post:

Home prices reach record high as affordability crisis worsens

Home prices reached a new record in May amid an ongoing housing shortage, even as high mortgage rates continued to push affordability out of reach for millions of Americans.

Prices increased 5.9% nationally in May when compared with the previous year, the S&P CoreLogic Case-Shiller index showed on Tuesday, down from the 6.4% pace recorded the previous month.

On a monthly basis, prices climbed 0.3%, according to the index.

“Home prices hit a new high in May,” said Lisa Sturtevant, Bright MLS chief economist. “But with affordability a growing challenge for homebuyers and more new listings coming onto the market, we could be at the peak.”

The 10-city composite, which encompasses Los Angeles, Miami and New York, rose 7.7% annually, compared with an increase of 8.1% in April.

The 20-city composite, which also tracks housing prices in Dallas and Seattle, posted an annual gain of 6.8%, a decrease from the 7.3% figure recorded the previous month.

Prices rose in all the 20 major metro markets tracked by the index.

“All 20 markets observed annual gains for the last six months,” said Brian Luke, head of commodities, real and digital assets at S&P DJI, in a release. “The last time we saw that long a streak was when all markets rose for three years consecutively during the COVID housing boom.”

The largest price gain took place in New York, which recorded a year-over-year increase of 9.4%. It was followed by San Diego and Las Vegas, with respective gains of 9.1% and 8.6%.

Posted in Economics, Housing Bubble, National Real Estate | 85 Comments

The million dollar starter home

Posted on July 30, 2024 by grim

From National Mortgage Professional:

Starter Home Prices Topple $1M In More U.S. Cities

The barriers towards homeownership continue to mount for more first-time homebuyers, with Zillow reporting that the number of million-dollar starter homes has tripled since 2019. In more than 200 U.S. cities, buyers will find a price tag of $1 million or more on the typical starter home.

In Zillow’s analysis, “starter homes” were defined as those in the lowest third of home values in a given region. Five years ago, only 84 cities across the nation had starter homes worth at least $1 million, but that has now jumped to a record high 237 cities. Exactly half of all states have at least one city with a typical starter home worth $1 million or more.

Throughout the rest of the nation, the typical starter home is worth $196,611, which is comfortably affordable for a median-income household. However, the housing shortage that worsened over the pandemic has propelled home prices to new heights. Starter home values grew 54% over the past five years, even more than the 49.1% increase for the typical U.S. home in the same time frame. Zillow analysts concluded that soaring costs of homes have delayed the first home purchase for many, pushing the median age of first-time buyers to 35 years old last year. That is a year older than in 2019. 

Orphe Divounguy, a senior economist at Zillow, emphasized that homebuyers are battling affordability and availability so much that a $1 million starter home is a bargain in their region. Yet, he added, things may turn around first-time buyers soon enough.
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Among metropolitan areas, the New York City metro, which includes parts of New Jersey and Pennsylvania, has the most cities with million-dollar starter homes, at 48. The San Francisco metro has the next highest count at 44, followed by Los Angeles (35), San Jose (15), and Miami (8) and Seattle (8). Irvine, with a population of more than 300,000, is the biggest city with $1 million starter homes.

Posted in Demographics, Economics, Employment, Housing Bubble | 52 Comments

Buyers walking?

Posted on July 29, 2024 by grim

From Newsweek:

Florida Housing Market Faces ‘Nightmare Scenarios’ as Deals Collapse

Florida homebuyers are backed out of deals to purchase properties at a record rate, according to a new report from real estate brokerage Redfin, as prices continue rising and mortgage rates aren’t budging.

In June, nearly 56,000 home-purchase agreements were canceled in the Sunshine State, the equivalent of roughly 14.9 percent of all homes that went under contract that month. It’s the highest percentage of any June on record.

“We’re seeing nightmare scenarios where deals are getting canceled at the last minute for the most minute reasons,” Rafael Corrales, a Redfin Premier agent in Miami, said in a press release. In the coastal city, around 2,500 home purchases were canceled in June—about 17.6 percent of all homes that went under contract.

“Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue,” Corrales explained. “I don’t want my buyers to be surprised by all of the expenses that come with owning a home in Florida, so I advise them to proactively research the hefty costs of insurance, property taxes and HOA fees, in addition to the cost of their mortgage payment.”
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Orlando, Florida, was the city with the highest percentage of home-purchase agreements canceled in June out of the 50 most populous U.S. metropolitan areas analyzed by Redfin, for a total of 900—about 20.8 percent of all homes that went under contract that month.

It was followed by Jacksonville, Florida (20.5 percent), Tampa, Florida (20.5 percent), Las Vegas (20.2 percent) and San Antonio, Texas (19.9 percent).

Posted in Housing Bubble, National Real Estate, Where's the Beef? | 70 Comments

Jersey New Listings Fall

Posted on July 26, 2024 by grim

From NJ.com:

N.J. real estate listings down slightly. See full list.

The number of newly listed homes in New Jersey dropped by less than 1% in June compared to the same time last year, according to Realtor.com.

In June, 9,256 listings were added to the housing market statewide, compared to 9,334 last year, ranking New Jersey seventh lowest nationwide for growth in new home listings.

New Jersey was ahead of Minnesota, North Dakota and Oregon, ranked first, second and third lowest – the worst nationwide – for growth in new home listings.

Posted in Housing Bubble, National Real Estate, New Jersey Real Estate | 55 Comments

Biden Out

Posted on July 22, 2024 by grim

From CNN:

Harris seeks to rally Democrats after Biden drops out of race

Posted in Crisis, National Real Estate, Politics | 242 Comments

Why not just lower taxes?

Posted on July 19, 2024 by grim

From NJ.com:

The property tax overhaul

New Jersey’s property tax breaks, including the popular Senior Freeze and ANCHOR benefits, could soon undergo dramatic changes as the state tries to keep its promise to further cut taxes for senior citizens under the Stay NJ law, according to recommendations released Thursday.

The long-awaited 101-page report comes from the Stay NJ Task Force,which was charged with figuring out how to implement the complicated and much-debated law in time for the 2026 deadline for when payments are scheduled to start.

Stay NJ, in conjunction with ANCHOR and Senior Freeze, is designed to slash property taxes by up to 50%, capped at $6,500, for senior citizens in New Jersey who earn less than $500,000 a year.

The recommendations, reviewed by NJ Advance Media, include a plan to simplify the state’s overall property tax break regime by having one application for all three programs, beginning early next year.

“A single comprehensive application along with consolidation of the programs in a sequential manner, followed by changes to how benefits are paid, should be accomplished in steps,” the report said.

But while the law also called for the task force to develop recommendations on how to fund Stay NJ, critics note the report does not include any new guidance on that.

Opponents from both sides of the political aisle have long warned that paying for the program — and even launching it at all — will be a tall challenge. The state has to reach several benchmarks and set aside more than $1 billion each year for Stay NJ payments to go out.

The recommendations that are included in the report would still have to be adopted by the state Legislature and signed by the governor to be implemented. They include:

  • Complicated calculations: The bottom line is that senior homeowners would get 50% off their property tax bills, capped at $6,500, from a combination of Stay NJ, ANCHOR, and Senior Freeze. Also, no one would get less than they currently receive under ANCHOR and Senior Freeze together.
  • Benefit calculation: The state Division of Taxation would compare a senior homeowner’s combined ANCHOR and Senior Freeze benefit to a Stay NJ benefit. “An applicant would receive the higher of the two, up to 50% of property taxes, not to exceed $6,500,” it said. If the senior homeowner has not received the equivalent of 50% of their taxes, up to $6,500, from ANCHOR and Senior Freeze combined, an additional benefit under Stay NJ would be paid by check. Homeowners not eligible for ANCHOR or Senior Freeze but eligible for Stay NJ would receive the maximum Stay NJ benefit of $6,500 or 50% of their property taxes.
  • Checks, then credits: Because of the complicated nature of providing property tax credits through the state’s 564 municipalities, the Stay NJ benefit, rather than being paid as a quarterly credit, would be sent to senior homeowners as a check in the first year. The goal would be to make the Stay NJ payment a credit on tax bills in the program’s second year.
  • One application: Residents would complete one application for Stay NJ, ANCHOR, and Senior Freeze effective Feb. 1, 2025, and legislation would need to be passed at least 90 days prior to make sure there’s time to design, print and mail the combined application.
  • Changes to residency and age requirements: All three programs would require a full year of residency as of Dec. 31, 2024. New Senior Freeze applicants would need to be 65 as of Dec. 31, 2023.
  • Streamlined income definition: ANCHOR and the Senior Freeze currently have different definitions of “taxable income.” These definitions would be made the same under all the tax break programs.
  • Renters: Renters are not eligible for Stay NJ or Senior Freeze but would continue to receive the ANCHOR benefit via check or direct deposit.
Posted in Demographics, Economics, New Jersey Real Estate, Politics | 131 Comments