2024 – Page 34

Home Affordability Gets Tougher During Second Quarter Across U.S. As Prices Shoot Back Up

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Major Home-Ownership Expenses Now Consume 35 Percent of Average Wage Nationwide; Portion Hits High Point in Over a Decade as Median Home Price Soars to Another Record ATTOM, a leading curator of land, property and real estate data, released its second-quarter 2024 U.S. Home Affordability Report showing that median-priced single-family homes and condos remained less affordable in the second quarter of 2024 compared to historical averages in 99 percent of counties around the nation with enough data to analyze. The latest trend continued a pattern, dating back to early 2022, of home ownership requiring historically large portions of wages around the country amid ongoing high residential mortgage rates and elevated home prices. The report also shows that major expenses on median-priced homes consumed 35.1 percent of the average national wage in the second quarter – marking the high point since 2007 and standing well above the common 28 percent lending guideline. Both the historic and current measures represented quarterly and annual setbacks following a brief period of improvement from late 2023 into early 2024. The shifts came as the national median home price spiked to a new high of $360,000 during the Spring buying season and mortgage rates remained around 7 percent, leading to increases in the cost of owning a home that outpaced recent increases in wages. As a result, the portion of average wages nationwide required for typical mortgage payments, property taxes and insurance grew about three percentage points from both the first quarter of this year and the second quarter of last year. “The latest affordability data presents a clear challenge for home buyers. While home prices are increasing and mortgage rates remain relatively high, these factors are making homes less affordable,” said Rob Barber, CEO for ATTOM. “It’s common for these trends to intensify during the Spring buying season when buyer demand increases. However, the trends this year are particularly challenging for house hunters, more so than at any point since the housing market boom began in 2012. As the 2024 buying season progresses into the Summer, we will continue to monitor the data closely.” The patterns during the months running from April through June came as the national median home price rose 7.3 percent quarterly and 4.7 percent annually. Further hampering buyers during the second quarter were average 30-year home-mortgage rates that ended the quarter at about 6.9 percent, or more than double where they stood in 2021. Those factors helped boost home ownership expenses by about 10 percent in the second quarter of 2024 after declining slightly in the prior two quarters. The report determined affordability for average wage earners by calculating the amount of income needed to meet major monthly home ownership expenses — including mortgage payments, property taxes and insurance — on a median-priced single-family home, assuming a 20 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the U.S. Bureau of Labor Statistics. Compared to historical levels, median home ownership costs in 582 of the 589 counties analyzed in the second quarter of 2024 were less affordable than in the past. That number was up just slightly from 579 of the same counties in the first quarter of this year and from 577 in the second quarter of last year. But it was more than 15 times the figure from early 2021. Meanwhile, the portion of average local wages consumed by major home-ownership expenses on typical homes was considered unaffordable during the second quarter of 2024 in about 80 percent of the 589 counties in the report, based on the 28 percent guideline. Counties with the largest populations that were unaffordable in the second quarter were Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA, and Orange County, CA (outside Los Angeles). The most populous of the 115 counties with affordable levels of major expenses on median-priced homes during the second quarter of 2024 were Harris County (Houston), TX; Wayne County (Detroit), MI; Philadelphia County, PA; Cuyahoga County (Cleveland), OH, and Allegheny County (Pittsburgh), PA. National median home price jumps quarterly and annually in most marketsThe national median price for single-family homes and condos shot up to $360,000 in the second quarter of 2024 – $15,000 more than the previous high of $345,000 hit in the Spring of 2022. The latest figure was up from $335,500 in the first quarter of 2024 and from $344,000 in the second quarter of last year. At the county level, median home prices rose from the first quarter to the second quarter of this year in 514, or 87.3 percent, of the 589 counties included in the report. Annually, they followed a similar pattern, up in 441, or 74.9 percent of those markets. Data was analyzed for counties with a population of at least 100,000 and at least 50 single-family home and condo sales in the second quarter of 2024. Among the 47 counties in the report with a population of at least 1 million, the biggest year-over-year increases in median prices during the second quarter of 2024 were in Orange County, CA (outside Los Angeles) (up 16.2 percent); Alameda County (Oakland), CA (up 12 percent); King County (Seattle), WA (up 11.3 percent); Santa Clara County (San Jose), CA (up 9.8 percent) and Nassau County, NY (outside New York City) (up 8.9 percent). Counties with a population of at least 1 million where median prices remained down the most from the second quarter of 2023 to the same period this year were Honolulu County, HI (down 3.8 percent); Tarrant County (Forth Worth), TX (down 1.5 percent); Oakland County, MI (outside Detroit) (down 1.4 percent); Hennepin County (Minneapolis), MN (down 1.1 percent) and Fulton County (Atlanta), GA (down 1 percent). Prices growing faster than wages in half the U.S.With home values mostly up annually throughout the U.S., year-over-year price changes outpaced changes in weekly annualized wages during the second quarter of 2024 in 293,

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The good news for prospective buyers: There are more new listings to choose from, and monthly housing payments are down nearly $100 from their April peak as mortgage rates decline. Pending home sales posted their biggest decline since February during the four weeks ending June 30, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. The median sale price rose 5% from a year ago, hitting an all-time high. New listings jumped 10%. Full data is provided below: For Redfin economists’ takes on the housing market, please visit Redfin’s “From Our Economists” page. Leading indicators Indicators of homebuying demand and activity Daily average 30-year fixed mortgage rate 7.13% (July 2) Up from a 3-month low of 6.97% three weeks earlier, but down from a 5-month high of 7.52% in early May Up from 7.03% Mortgage News Daily Weekly average 30-year fixed mortgage rate 6.86% (week ending June 27) 4th straight week of declines; lowest level since week ending April 4 Up from 6.71% Freddie Mac Mortgage-purchase applications (seasonally adjusted) Decreased 3% from a week earlier (as of week ending June 28) Down 12% Mortgage Bankers Association Redfin Homebuyer Demand Index (seasonally adjusted) Essentially unchanged from a month earlier (as of week ending June 30) Down 17% Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents Touring activity Up 21% from the start of the year (as of June 30) At this time last year, it was also up 11% from the start of 2023 ShowingTime, a home touring technology company Google searches for “home for sale” Down 4% from a month earlier (as of July 1) Down 20% Google Trends Key housing-market data U.S. highlights: Four weeks ending June 30, 2024Redfin’s national metrics include data from 400+ U.S. metro areas, and is based on homes listed and/or sold during the period. Weekly housing-market data goes back through 2015. Subject to revision. Four weeks ending June 30, 2024 Year-over-year change Notes Median sale price $397,954 4.9% All-time high; biggest increase since March Median asking price $409,975 6.1% Biggest increase since October 2022 Median monthly mortgage payment $2,749 at a 6.86% mortgage rate 6.5% $88 below all-time high set during the 4 weeks ending April 28 Pending sales 87,160 -4.6% Biggest decline in 4 months New listings 100,989 9.9% Biggest increase in 2 months Active listings 967,516 17.5% Months of supply 3.3 +0.7 pts. 4 to 5 months of supply is considered balanced, with a lower number indicating seller’s market conditions. Share of homes off market in two weeks 41.6% Down from 47% Median days on market 32 +5 days Share of homes sold above list price 32.3% Down from 36% Share of homes with a price drop 6.9% +2.1 pts. Highest level on record Average sale-to-list price ratio 99.7% -0.3 pts. Metro-level highlights: Four weeks ending June 30, 2024Redfin’s metro-level data includes the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy. Metros with biggest year-over-year increases Metros with biggest year-over-year decreases Notes Median sale price Anaheim, CA (14.7%) Newark, NJ (13.5%) Nassau County, NY (12.6%) New Brunswick, NJ (11.7%) Fort Lauderdale, FL (11.1%) Austin, TX (-2.1%) Dallas (-1.5%) San Antonio (-0.2%) Declined in 3 metros Pending sales San Jose, CA (18.2%) San Francisco (6.1%) Pittsburgh (4.8%) Providence, RI (2.8%) Boston (2.2%) West Palm Beach, FL (-16.4%) Houston (-13.4%) Atlanta (-12%) Miami (-11.7%) Minneapolis (-10.7%) Increased in 9 metros New listings San Jose, CA (49.2%) Seattle (28.7%) Miami (24.8%) Boston (24.3%) Montgomery County, PA (22.2%) Atlanta (-7.7%) Detroit (-0.4%) Declined in 2 metros To view the full report, including charts, please visit: https://www.redfin.com/news/housing-market-update-home-prices-record-high-sales-decline

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Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, released its July 2024 ICE Mortgage Monitor Report, based on the company’s industry-leading mortgage, real estate and public records data sets. This month’s Mortgage Monitor looks into the dynamics behind the changing makeup of the active mortgage market, which is gradually shifting toward higher average rates. As Andy Walden, ICE’s Vice President of Research and Analysis notes, the overall market remains heavily skewed toward lower-rate mortgages, but that is changing. “As of May, 24% of homeowners with mortgages now have a current interest rate of 5% or higher,” said Walden. “As recently as two years ago an astonishing nine of every 10 mortgage holders were below that threshold. “All in, there are 5.8M fewer sub-5% mortgages in the market today than there were at this time in 2022. This has been a slow-moving change, as borrowers with lower rates have sold their homes or, to a smaller degree, refinanced to withdraw equity. The entire market is acutely aware of how elevated rates have been constraining origination volumes. But seen from another angle, the same dynamic is also serving to gradually enlarge the population of folks with high-rate mortgages, who are actively waiting for the moment a refinance makes sense. This would benefit both a growing number of homeowners and lenders.” As noted in the report, 4M first lien mortgages originated since 2022 have 30-year rates above 6.5%, with 1.9M having rates of 7% or higher. On average, there are ~240K active mortgages in each 1/8th of a percentage point bracket in the 7-7.625% range; however, there’s a noticeable spike of 690K loans with rates just below 7%. Walden explains: “The concentration of active loans just below 7% has more to do with borrower psychology than concrete savings. There’s clearly something appealing in today’s market for a homeowner to see a 6-handle in front of their mortgage rate. From a rate/term refinance lending perspective, this group is worth watching as they represent a potential tipping point for a return to more meaningful, albeit historically modest, refi volumes.” For now, refi volumes remain at a fraction of historical levels. That said, we have seen some notable shifts in who is taking out refis in today’s market. Consider, for example, the recent rise in VA market share, from less than 10% of rate/term refis a year ago to more than 30% in recent weeks, according to ICE origination data. The rise in VA refinance share seems to be due, in large part, to streamline refinances. Some veterans, especially those who had taken out mortgages within the past year, availed themselves of the streamlined refinancing program to lower their interest rate by more than a full percentage point, for an average savings of $230 per month among April originations, according to a before-and-after analysis of ICE McDash +Property data. That makes sense, considering the ICE U.S. VA 30-Year fixed rate mortgage index is down nearly a full percentage point from its peak in late October, with the average rate offering among such loans notably below that of FHA and conforming mortgage counterparts. VA refinances also helped improve the servicing retention rate in Q1 to its highest level in 18 months, with retention of FHA and VA refinances tripling from 15% in Q4 to 46% in Q1. Those lower payments come at a cost, however, as the average borrower increased their loan balance to buy down their rate and/or finance closing costs. The quick turn also resulted in unusually high prepay speeds, which can negatively impact investors in VA loan backed securities. The recent activity among VA loans supports the findings of the recently released 2024 ICE Borrower Insights Survey, which showed that finding the lowest mortgage rate trumped all other concerns when choosing a lender, with a 20-point delta between that and the next most frequent choice. But, while borrowers want the lowest rate, they typically don’t consider many options. In fact, 84% of borrowers surveyed considered only one (36%) or two (48%) options before selecting a lender. This, as well as the successful proactive retention of FHA/VA borrowers in Q1, shows how important it is for lenders to stay attuned to their borrowers’ needs and make first contact when a beneficial refi opportunity arises. Much more information on these and other topics can be found in this month’s Mortgage Monitor. Source: Intercontinental Exchange

Offerpad

by Carole VanSickle Ellis
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Providing Investors with “Certainty & Control” By Carole VanSickle Ellis When Offerpad founder, CEO, and chairman Brian Bair founded Offerpad nine years ago, he did so with a clear goal of control. Bair was not seeking authority for himself, however. He wanted to establish a platform where buyers and sellers could take control of their own transactions and, in his words, “make the real estate experience much easier, take the friction out of it, and give buyers and sellers certainty and control.” Before founding Offerpad, Bair had spent decades in retail real estate, successfully blending traditional transactions with a personalized “concierge approach” in which he listed and facilitated the sale of properties in addition to offering complimentary landscaping, basic handyman services, and even pool services. This “white glove” approach to sales created a positive selling experience and a compelling reason for buyers to take a closer look at Bair’s properties. Also at that time, he was acquiring large volumes of single-family properties at auction to renovate and sell. “I was entrenched in real estate from all different aspects,” Bair recalled, adding, “Two things happened during that time: I saw the value of the cash offer, and I also saw the value of providing a seller with more control over their closing date. For us, providing that control has always been key.” Once Bair identified the allure of a controlled closing date, he leveraged that element of his business to stand out from the crowd of emerging single-family buyers. “One of the biggest challenges we faced in those early days was trying to communicate with homeowners and homebuyers that we are in real estate as a service. We are looking more for people who value their time, certainty, and control than for people in distressed situations. We are very proud of that,” he said. “Growing Up” as Real Estate Started to Change In 2015, when Offerpad formally opened its doors, Bair’s prized element of consumer control was only just entering the mainstream in a variety of sectors. For example, Uber, founded in 2009, was in a period of massive growth; Carvana and DoorDash were both still in their nascent phases, and Bitcoin was valued at roughly $400 and had recently debuted on internet marketplaces that enabled owners to trade it from their iPhones. It was the perfect time for an innovative real estate platform to make its mark on the market as well. “People were just starting to sell (and buy) most of the other elements of their lives on their smartphones, and I felt strongly that they would just want more and more of that control,” Bair recalled. “That became our mission, and that is why we are really as much of a logistics company as we are a tech company or real estate company today. We learned as we grew in those early days that deals should be treated like math problems and every day should be treated like it matters.” Eventually, the company became so effective at problem-solving it expanded into a full-scale renovation operation and, recently, into a partnership format with other real estate investors. Bobby Triplett, senior vice president of renovations at Offerpad, said the company handles hundreds of its own renovations each month in addition to renovating properties for investors, REIT funds, SFR funds, and other third-party partners. “We renovate every property, whether it is one of ours or an independent investor’s property, as if it were our own,” Triplett explained. “That means every one of our partners gets our buying power, our vendor loyalty, our boots-on-the-ground expertise, and our front-of-line access to the things needed for large-scale renovations.” Investors working with Offerpad also gain access to local teams that can assist with writing out scope of work on projects and access insights and resources not available to most individual investors. Triplett noted that Offerpad works with investors on all scales, from a client in Jacksonville working on three homes a month through Offerpad to institutional investors purchasing hundreds of homes in a variety of markets each month. “Our goal is to help investors free up their energy while still ending up with a superior product when we are done,” Triplett said. “We operate in a lot of markets, and we believe that investors who partner alongside us can save themselves a significant amount of money, headaches, and time by working with us in those markets. We believe we are the cure-all to the hang-ups most investors face in the renovation world.” Boots on the Ground in Every Active Market When you operate in more than two dozen markets around the country and handle more than 400 projects in most quarters, you know from experience that every single market is different. “The key to handling those differences is to do the best and most suitable renovations and repairs in every market, and the key to that lies in having local experts equipped to handle any situation,” said Triplett. “Every market has its own idiosyncrasies, that is for sure,” said Triplett. He continued, “In Florida, for example, everything is hurricane-regulated, whereas in the Carolinas and Georgia, most houses have crawl spaces, which you will not usually find in Florida. When you are doing renovations in the Midwest, you will encounter old basements more often than in other regions, and certain soils around the country can create serious foundation issues.” The list of geographic peccadillos goes on and on, but Triplett says Offerpad has the answer to dealing with the unique demands of renovating real estate in any market. “We hire local experts,” he explained. “The renovation director in Atlanta is, of course, from Atlanta, and our renovation directors in Indianapolis and Ohio are Midwest guys. Instead of going the one-size-fits-all route, we hire local experts who will make smarter decisions on the homes in their area and will be better stewards of our resources than someone who is not familiar with the market.” Triplett described the Offerpad process of determining what renovations will be needed

Savannah, Georgia

by Carole VanSickle Ellis
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The “Hostess City of the South” Continues to Heat Up in 2024 By Carole VanSickle Ellis Long before it was known for its beautiful square gardens, rich history, and the largest and fastest-growing container terminal in the United States, Savannah, Georgia, was known as the capital of the Royal Colony of Georgia. As the oldest city in the state of Georgia today (although no longer its capital), Savannah holds a unique place in the state’s housing market and broader economy thanks to a thriving film industry, a burgeoning tech and manufacturing community, one of the largest ports in the country, and a highly attractive housing market that continues to heat up as 2024 continues. In fact, some analysts believe the entire metro area will become “unaffordable” by 2029 as home values continue to rise in the area. According to a study conducted by GOBankingRates and published in May of this year, Savannah is “outpacing the national average for growth” with home values a year ago of just over $312,000 and expected one-year growth of nearly 9%. The analysts conducting the study projected that by 2029, median home values in Savannah could exceed $511,000, roughly $6,000 more than the U.S. median projected home value for the same time period. By 2033, they wrote, home values could be nearly $712,000 in the area. This growth trend has been in place for a while, now. In late 2023, Urbanize analyst Josh Green observed, “Savannah has bucked a national trend that has seen new housing permits dip by 17.5% vs. the same time period last year,” adding, “Savannah’s total of 2,090 new housing permits in the first six months [of this year] pointed to…a resilient local economy.” Green cited a “booming jobs market, growing port-related industries, and record tourism” as primary drivers for the Savannah market. The Allure of Savannah Real Estate Remains Strong As the population in Savannah and the surrounding metro area (Savannah is the seat of Chatham County, and the Savannah MSA includes Chatham, Bryan, and Effingham Counties) continues to climb, fix-and-flip investors continue to find opportunities in Savannah and the surrounding region. According to data from ATTOM Data Solutions, in 2023, Savannah, Georgia home flips surged in average ROI, rising from 14.3% to 56.8%. New single-family construction appears poised to continue the trend, also, with 7.5% more permits for single-family units issued in 2023 than in 2022. As demand stubbornly rises, Chatham County inventory has responded with slightly lower listing prices (median list price was 4% lower in April 2024 than a year prior) and slightly increased listing volumes (the county’s 764 active listings in April represented a 78.9% increase over the year prior). An increasing number of homebuyers appear unwilling to compromise when it comes to single-family living despite still-low volumes of available inventory, although local developers seem to be counting on eventual capitulation in favor of larger and modern multifamily options. According to data from the U.S. Census Building Permit Survey, applications for small multifamily residences (2-4 units) fell over the course of the past year by nearly 91%, while applications for larger 5+ unit buildings rose by just over 63%. “It seems that Savannah is leaning toward larger housing complexes,” observed Point2 researchers in light of the data. “[This] could be a sign that smaller multifamily residences are going out of style.” In the Savannah luxury market, however, nothing is going out of style yet. Top-tier homes in the area were selling for 137% more in May 2024 than they were the year prior. “In many areas, [luxury] prices came back down or plateaued [when pandemic-related remote work ended], but in some cities, luxury price growth has continued unabated,” wrote Realtor.com data journalist Evan Wyloge. Realtor.com senior economic analyst Hannah Jones observed cities that have retained price growth in the high-end space in the wake of the pandemic often are “strong retiree destinations” or have historically been areas where buyers could obtain “relatively more affordable, wide-open spaces.” She also noted regions like Savannah hold their appeal thanks to “sunny, warm climates and the lifestyle those attributes allow,” concluding, “Even as some markets have seen luxury prices stabilize, these cities continue to attract affluent buyers.” Savannah’s “Southern luxury vibe, with big, old trees and historic homes,” is the perfect fit for this trend and continues to attract out-of-state buyers seeking affordability and a pleasant location. During the pandemic and in the two years following, California alone contributed nearly 26,000 people to Georgia’s population as homeowners sought the relative affordability of the southeast. The Savannah Economic Development Authority (SEDA) reacted quickly to this trend, establishing the Savannah Technology Workforce Incentive (STWI), a program that reimburses individual moving expenses for tech workers moving to the area. Local planners at SEDA viewed the incentive program as a growth move designed to create a workforce that would attract tech employers in the coming years. “If the next tech company wants to move here and hire 30 people, we want to have people already here who can do the job,” explained Jen Bonnet, who oversaw the program at the time. Incoming Employers Could Change the Face of the City’s Housing Market Savannah’s concerted effort to bring in qualified potential employees for high-value employers in lucrative industries like technology appears to be paying off. As of May 2024, global startup funding and support company F65 was tracking 26 promising tech companies and startups in the Savannah area, including patent developer Team RGE, medical prescribing platform MedView Systems, and 3D development gaming and film studio Tupelo Labs. The region also welcomed the Hyundai Metaplant, a multibillion-dollar electric vehicle plant projected to bring in 8,100 jobs over the next five years and create roughly $1 billion worth of investment from suppliers. This is the second electric vehicle plant to commit to making its home in the state and the first in the Savannah area. Although Rivian, the first EV manufacturer to commit to Georgia with plans to build a plant closer to Atlanta, has currently