February 2022 – Page 2

Economic Growth Expected to Slow as the Fed Wrangles Inflation

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Rising Mortgage Rates and Even Higher Home Prices Projected to Limit Affordability With inflation at its highest level in four decades, the Federal Reserve is expected to enact a more aggressive course of monetary policy tightening than previously forecast, with a 50-basis-point increase to the federal funds rate in March now predicted to be the first in a series of interest rate hikes through 2023, according to the February 2022 commentary from the Fannie Mae (OTCQB: FNMA) Economic and Strategic Research (ESR) Group. The combination of a less accommodative interest rate environment and an increasingly worker-scarce labor market led the ESR Group to downgrade its expectations for 2022 real GDP growth from 3.1 percent to 2.8 percent; however, its expectations for 2023 headline growth remained unchanged at 2.2 percent, a pace that approaches the long-run trend. Risks to the forecast include uncertainty over the future course of inflation, potential geopolitical developments in Eastern Europe, and currently unforeseen COVID-related disruptions to consumer behavior and the labor market. In addition to a slowdown in economic activity, the ESR Group expects housing activity to moderate from 2021’s highs. Single-family home sales are expected to decline 2.4 percent in 2022 – a slightly steeper drop than the previously anticipated 1.2 percent dip – due to increasing affordability constraints associated with rising mortgage rates. As measured by the FHFA Purchase-Only Index, the ESR Group currently projects home price growth of 7.6 percent in 2022 and 3.3 percent in 2023, down from last year’s record-setting 17.3 percent. With the 30-year fixed mortgage rate now projected to close the year at 3.7 percent, refinance activity, as a share of total single-family mortgage originations, is expected to decline to 36 percent in 2022 from 58 percent in 2021 and could move even lower if rates move further upward. “Challenges to macroeconomic forecasting have grown not only because of inflation’s largely unexpected persistence but also because of its outsized and broad-based impact on the U.S. economy and global economic growth,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Headline inflation will likely decline from year-ago levels as price pressures ease, but upward price pressures are not expected to be as fleeting as initially thought – and it’s likely that the period of time required for inflation to be reversed has been extended significantly,” said Duncan. “Compared to a few months ago, financial markets now expect a substantially more aggressive monetary posture from the nation’s central bank, which is likely to result in heightened volatility as the Fed retains the optionality necessary to engineer a non-inflationary soft landing. We currently forecast the Consumer Price Index closing 2022 and 2023 at 4.4 percent and 2.5 percent, respectively, down from a peak of 7.6 percent in the current quarter. If correct, inflation will still be above the Fed’s 2-percent target at the end of next year, despite our expectation of more aggressive Fed action.” Duncan continued: “For homebuyers, we believe that borrowing costs will likely rise with the increase in mortgage rates, further eroding affordability. At the same time, we expect demographic factors and a shortage of housing supply to be supportive of housing activity. What remains unknown is how higher mortgage rates and tighter monetary policy – through expected interest rate hikes and changes to the makeup of the Fed’s portfolio – will impact home prices.” Visit the Economic & Strategic Research site at fanniemae.com to read the full February 2022 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

Get Ahead of Important Home Renovation Projects in 2022

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The Appraisal Institute, the nation’s largest professional association of real estate appraisers, encouraged homeowners to focus on energy-efficient, safety-oriented and work-accessible improvement projects when seeking to potentially improve their property’s value. “In today’s competitive real estate market, the Appraisal Institute believes home remodeling and renovation projects are important and sometimes necessary aspects of homeownership when undertaken properly,” said Appraisal Institute President Jody Bishop, MAI, SRA, AI-GRS, “However, not all home improvement projects offer a full return on investment – cost doesn’t necessarily equal value.” According to Architecture Digest’s, “10 Renovation Trends You’ll be Seeing a Lot of in 2022,” digital interior design was on the rise even before social distancing and working from home became the norm after the surge of the COVID-19 pandemic in 2020. In 2022, the industry is shifting towards newer technologies such as virtual staging, furniture shopping with 3D models and implementing artificial intelligence products for school, work and to make our homes smarter. In addition, the article notes that green homes are a trend to be on the watch for. The onset of the pandemic has made the importance of health and environmental awareness top of mind. Reusing furniture, repurposing flooring and adopting sustainable materials and lighting that consumes less energy will be popular in the upcoming year. Expect to see landscaping that is eye-catching yet protects, especially in areas prone to wildfire or flood, as well as exterior walls of brick or stone. There is an ever-increasing attention to sustainable options like bamboo or cork. Solar panels on the roof that take eco-friendliness even further may also bring added value. The concerns from the pandemic led to realizations about safety and storage in the home, according to Bob Vila’s remodeling trends for 2022 predictions. HVAC units with “whole house” air filtration systems or anti-microbial tile could also become more common. “Many households now have several generations under one roof, and that means accommodating the difficulties the elderly might have with their day-to-day lives. To that end, expect to see many people renovating their homes for aging in place, complete with roll-in showers, grab bars, and nonslip flooring.” The pandemic has allowed many people to work from home. Although normal life is slowly returning, many still have the option to work remotely. Owners interested in remodeling or selling should consider the use of multifunctional rooms and updating spaces that can serve as study halls and work zones, complete with fast Wi-Fi connections, virtual meeting setups, comfortable seating and plenty of charging stations, according to another 2022 trend prediction. It is essential that the office space is organized, functional and bright. Homeowners should consider simple updates like paint or lighting changes. Instead of using the dining room table or corner of your bedroom as a space to focus, expect the trend to move toward carving out dedicated spaces for functionality. “In today’s competitive marketplace, professional appraisers provide homeowners with the confidence to make practical remodeling and renovation decisions that likely will be smart choices financially,” Bishop said. Homeowners may find it best to hold off on big renovations if they’re unsure how long they will be in their property. The longer a homeowner stays, the greater the opportunity for a potential return on investment. However, regardless of cost, some home improvement projects can be worthwhile simply because they improve the owner’s quality of life, Bishop added. For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a highly qualified real estate appraiser – such as a Designated Member of the Appraisal Institute – to conduct a feasibility study. Learn more at www.appraisalinstitute.org.

WORD OF THE DAY: Rigmarole

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[ri-gə-mə-ˌrōl] Part of speech: Noun Origin: English, mid-18th century Definitions: 1. Incoherent or nonsensical chatter 2. A long, complex procedure, sometimes designed to confuse Examples of Rigmarole in a sentence “The senator, during the filibuster, went on and on with his rambling rigmarole.” “The rigmarole involved with becoming a certified pilot is complicated, but it’s worthwhile.” About Rigmarole During the Middle Ages, a “ragman roll” was a collection of documents that Scottish nobles used to declare their loyalty to King Edward I of England. The documents were long and complex — similar in meaning to the modern word they became: rigmarole. Did you Know? Rigmarole has been so often misused with an extra a, as rigamarole, that both forms are now accepted in English.

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– The U.S. currently has 481 million-dollar cities, in which the typical home value is at least $1 million. – Idaho, Montana and Tennessee gained million-dollar cities for the first time, although most exist within eight coastal metros. – There are more new $1 million cities this year than there were in the past six years combined. A record 146 U.S. cities became new “million-dollar cities” in 2021, Zillow data shows. There are now 481 cities in which the typical home value is at least $1 million. If current rates of appreciation hold, 49 more could join the $1 million club by midyear. The number of cities that crossed the $1 million threshold in 2021 is almost triple that of cities reaching those heights in 2020, underscoring a record-setting year of home appreciation that saw the typical U.S. home gain 19.6% in value. The majority of million-dollar cities are clustered within a few large coastal regions; the San Francisco and New York metro areas lead the way with 76 million-dollar cities each. The Los Angeles metro is third with 57 cities, and San Jose is fourth with 22. In total, 60% of all million-dollar cities lie within eight metro areas, and almost half (44%) are in California. “The surge in demand for housing last year sent home values skyrocketing, even in places where prices already were sky-high, and that helped tip a record number of cities into the million-dollar club,” said Jeff Tucker, Zillow senior economist. “The locations of these newly seven-figure towns bust the myth that everyone fled California and the Northeast last year, as California, Massachusetts and New York led the pack for the most new cities with home values above $1 million. Still, we’re seeing how the geography of wealth in the U.S. has begun to shift, as 2021 was the first year for both Idaho and Montana to place any cities on this list, and now those Western states boast three million-dollar cities each.” Indian Creek, Florida, an exclusive 300-acre island in Biscayne Bay in Miami, is the most expensive city in the country, with a typical home value of around $28.3 million. The city has a total population of fewer than 100 residents, including a handful of high-profile celebrities such as Tom Brady and Gisele Bündchen. In the No. 2 spot is Atherton, a small town on the San Francisco Peninsula where the typical home value sits around $7.7 million. Hunts Point, Washington; Jupiter Island, Florida; and Sagaponack, New York fill out the top five, with typical home values of roughly $6 million each. “With such sharp increases in home prices over the last year, we’re seeing tons of demand come from current homeowners who’ve decided to tap into their home equity to move up into their dream home,” said Erik Throm, an agent with Fast Real Estate in San Francisco. “But even expensive homes are moving quickly in this market, and shoppers should be prepared with a pre-qualification letter and the help of a trusted local agent who knows the pros and cons of their specific neighborhood and how to structure a winning bid that still protects a buyer in an incredibly competitive and high-priced market. “ Metros with the Most $1 Million Cities (December 2021) Metro Number of $1 Million Cities New York, New York 76 San Francisco, California 76 Los Angeles, California 57 San Jose, California 22 Boston, Massachusetts 18 Seattle, Washington 16 Miami, Florida 14 Washington, D.C. 11 Santa Maria–Santa Barbara, California 9 Santa Rosa, California 9 Top 10 Most Expensive Cities 2021 2021 Typical HomeValue 2011 2011 Typical HomeValue 1. Indian Creek, Florida $28,326,518 Indian Creek, Florida $15,558,572 2. Atherton, California $7,698,328 Atheron, California $3,827,781 3. Hunts Point, Washington $7,013,823 Jupiter Island, Florida $3,101,817 4. Jupiter Island, Florida $6,852,623 Sagaponack, New York $3,073,341 5. Sagaponack, New York $5,957,385 Belvedere, California $2,824,324 6. Hillsborough, California $5,369,777 Hunts Point, Washington $2,567,069 7. Los Altos Hills, California $5,250,550 Hillsborough, California $2,552,220 8. Golden Beach, Florida $5,178,527 Los Altos Hills, California $2,497,842 9. Belleair Shore, Florida $4,966,651 Montecito, California $2,424,874 10. Belvedere, California $4,689,895 Golden Beach, Florida $2,364,450 SOURCE Zillow

LRES Welcomes Natalie Harrison as Director, Vendor Management

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LRES Corporation, a provider of real estate appraisals and evaluations, asset management, and commercial trustee services, has expanded its leadership team to include industry veteran, Natalie Harrison, as Director of Vendor Management. Ms. Harrison oversees the management of LRES’ national panel of appraisers and real estate professionals, which includes panel outreach and all aspects of onboarding, management, and profile maintenance. “I am excited to be a part of the team and to be able to use my experience in REO vendor management to benefit LRES,” states Ms. Harrison. “In addition to day-to-day vendor oversight, my goal is to build and strengthen our relationships with our vendor panel so that LRES can provide even greater service to our clients.” “Our ability to provide timely and quality valuations relies heavily upon the strength of our panel. Natalie has been a tremendous addition to the team at a time when the industry is experiencing unprecedented volume,” states LRES Senior Vice President of Operations, Jill Haro. “Natalie has been able to expand our vendor coverage in areas where it had been historically difficult to attract new talent,” adds LRES President, Mark Johnson. “Our vendors are our partners, and Natalie fully embodies that LRES mindset.” Ms. Harrison has been in the industry for over 20 years, with the last 10 years at Fannie Mae as an Auction Asset Manager, and prior to that as an REO Sales Asset Manager at Saxon Mortgage. About LRES Founded in 2001, LRES Corporation provides property valuations, REO asset management, HOA solutions and commercial foreclosure services for the mortgage and real estate industry. At LRES, “We Hear You.“ Our team is committed to delivering superior service and customized, real-world solutions that help our clients effectively manage compliance and financial risks associated with property valuation and mortgage-related assets, and drive profitability. For the latest LRES information, visit the LRES Newsroom at www.lres.com/category/articles/ and register for email updates.

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People who need to move now are pinched by rising mortgage rates, sky-high home prices and rising rents The estimated monthly mortgage payment for a typical home for sale rose 25% year over year—or $388—to a record $1,931, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s based on the all-time high median asking price of $376,000 recorded during the four weeks ending February 6, and an average 30-year mortgage rate of 3.69%. Pending sales were down slightly from the same period in 2021, but 34% higher than they were two years earlier, weeks before the pandemic began. Meanwhile, the number of homes for sale was down 29% from a year earlier and down 50% from 2020. This constricted supply is depressing home sales, as mortgage purchase applications fell 10% during the week ending February 4. As a result, the market’s pace is accelerating. Over half (55%) of homes that found a buyer spent two weeks or less on the market—the highest rate on record for this time of year. “Movers are feeling a big pinch. There is nowhere for them to run from increasing housing costs now that mortgage rates are rising and inflation has spread to the rental market,” said Redfin Chief Economist Daryl Fairweather. “Homebuyers feel uneasy making offers on homes with such high asking prices, but there is no better alternative. Would-be homebuyers who bowed out last year are kicking themselves, but delaying purchasing a home another year could be a costly mistake. My advice to buyers who are worried they will have to overbid in order to win a home is to make sure they can see themselves living in the home for at least five years. I expect home values to rise over that time horizon even if there are short-term fluctuations in the housing market. Given how tough the housing market is for movers, it makes sense that so many homeowners are staying put. It’s also contributing to the shortage of new listings and making the market even tougher for buyers.” Key housing market takeaways for 400+ U.S. metro areas: Unless otherwise noted, this data covers the four-week period ending February 6. Redfin’s housing market data goes back through 2012. The median home sale price was up 14% year over year to $353,750. The median asking price of newly listed homes increased 15% year over year to an all-time high of $376,000. The monthly mortgage payment on the median asking price was up 25% from a year earlier to an all-time high of $1,931. This was up 28% from the same period in 2020. Pending home sales were down 0.5% year over year, but sales were up 40% from the same period in 2020, just prior to the start of the pandemic. New listings of homes for sale were down 10% from a year earlier. Compared to January 2020, new listings were down 12%. Active listings (the number of homes listed for sale at any point during the period) fell 29% year over year, dropping to an all-time low of 440,000. Listings were down 50% from the same period in 2020. 55% of homes that went under contract had an accepted offer within the first two weeks on the market, above the 49% rate of a year earlier and 41% in 2020. This is the highest the measure has ever been in January, and the highest level since March. 43% of homes that went under contract had an accepted offer within one week of hitting the market, up from 37% during the same period a year earlier and 29% in 2020. This measure is at a record high. Homes that sold were on the market for a median of 29 days, down from 38 days a year earlier and 59 days in 2020. 41% of homes sold above list price, up from 32% a year earlier and 19% in 2020. On average, 2.8% of homes for sale each week had a price drop, up 0.3 percentage points from the same time in 2021, but down 0.6 percentage points from 2020. The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, was 100.2%. In other words, the average home sold for 0.2% above its asking price. Other leading indicators of homebuying activity: Mortgage purchase applications decreased 10% week over week (seasonally adjusted) during the week ending February 4. For the week ending February 10, 30-year mortgage rates rose to 3.69%, the highest level since January 2020. Touring activity through February 6 was 3 percentage points behind 2021 and 2 points behind 2020 relative to the first week of January, according to home tour technology company ShowingTime. The Redfin Homebuyer Demand Index rose 1% during the week ending February 6 and was up 9% from a year earlier. To view the full report, including charts and methodology, please visit:https://www.redfin.com/news/housing-market-update-record-high-monthly-mortgage/ About Redfin Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, instant home-buying (iBuying), rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country’s #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we’ve saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 6,000 people.