WASHINGTON (March 23, 2022) – The share of millennial home buyers increased significantly over the past year. They are also the most likely generation to use the internet to find the home they ultimately purchase and most likely to use a real estate agent.
This is according to the latest study from the National Association of Realtors®, the 2022 Home Buyer and Seller Generational Trends report, which examines the similarities and differences of recent home buyers and sellers across generations.1 The NAR report found that the combined share of younger millennial (23 to 31 years old) and older millennial buyers (32 to 41 years old) rose to 43% in 2021, up from 37% the year prior. Almost two out of three younger millennials – 65% – found the home they ultimately purchased on the internet, a number that gradually decreases with older generations. Eighty-seven percent of all buyers purchased their home through an agent. This number was highest with younger millennials (92%) and older millennials (88%).
“Some young adults have used the pandemic to their financial advantage by paying down debt and cutting the cost of rent by moving in with family. They are now jumping headfirst into homeownership,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “While young buyers use new tech tools, they also use real estate agents at higher rates than other buyers to help find the right home and negotiate the terms of the transaction.”
Buyers from all generations agreed about the top reasons for using an agent: they wanted help finding the right home to purchase, negotiating the terms of sale and negotiating the price. The silent generation – those between the ages of 76 and 96 – as well as younger millennials were also more likely to want their agent to help with paperwork.
Those between the ages of 42 and 56 – Generation X – had the highest median household income at $125,000. They bought the most expensive and second-largest homes at a median price of $320,000 and size of 2,300 square feet, respectively. Older millennials purchased the largest homes at 2,400 square feet, and the silent generation bought the smallest at 1,800 square feet. Across all generations, the largest share of buyers purchased in suburban areas (51%) and small towns (20%).
“Not surprisingly, younger generations typically upgraded in size and price while older generations purchased more affordable properties,” Lautz said. “The majority of all generations bought single-family homes at higher shares than other housing types, and younger buyers dispelled the myth that they are flocking to city centers. When it comes to location, the suburbs and small towns are the places to buy.”
Three out of five of recent buyers – 60% – were married couples, 19% were single females, 9% were single males and 9% were unmarried couples. The highest share of unmarried couples were younger millennials at 21%. Single-female buyers significantly outnumbered single-male buyers across all generations. The highest percentage of single-female buyers was in the silent generation at 27%.
The study also found that first-time home buying among younger generations is on the rise, with over 4 out of 5 younger millennial home buyers – 81% – purchasing for the first time. Just under half – 48% – of older millennial buyers were first-time buyers.
“While the pandemic allowed many potential buyers to save for a down payment, demographics played a key role,” Lautz said. “There is a wave of millennial buyers who are aging into the traditional first-time buyer age range.” Boomers made up the largest share of home sellers at 42%, although the percentage of millennial sellers is on the rise, increasing from 22% to 26% over the past year. Lautz noted that for the first time it is now more likely for an older millennial to be a first-time seller than a first-time buyer.
“Many factors can contribute to the decision to buy or sell a home,” Lautz continued. “For all home buyers under the age of 57, the main driver was the desire to own a home of their own. Among those 57 and older, the desire to be closer to friends and family was the top reason, followed by the desire for a smaller home.”
Younger generations tended to move shorter distances when relocating. Among all ages, there was a median of 15 miles from the homes where recent buyers previously resided and the homes that they purchased. That distance was lowest among younger millennials (10 miles) and highest among older boomers (35 miles).
Overall, buyers expected to live in their homes for 12 years, down from 15 years last year. For younger millennials and the silent generation, the expected duration was only 10 years, compared to 20 years for younger boomers.
Debt continues to be a significant barrier for many when attempting to buy a home. Both Generation X and younger boomers delayed purchasing a home for five years due to debt, the longest of all age groups. Younger millennials had the highest share of student debt at 45%, with a median amount of $28,000. Twenty-seven percent of younger millennials cited that saving for a down payment was the most challenging step in the home buying process, compared to just 1% for older boomers. Nearly one in three – 29% – of younger millennials received down payment help in the form of a gift or loan from a friend or relative and 24% lived with friends or family, directly saving on rental costs.
Despite this hurdle, a vast majority of buyers have a positive outlook on homeownership. Eighty-six percent of all buyers reported they viewed a home purchase as a good investment, and roughly nine out of 10 people – 89% – said that they would recommend their agent for future services.
“A truth across all generations is that homeownership is seen as a cornerstone of the American dream,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “From building personal wealth and fostering communities, to strengthening social stability and driving the national economy, the value of homeownership is indisputable. Home buyers continue to turn to Realtors® as a trusted resource for helping find the right home and successfully navigating this increasingly complex process.”
The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
# # #1 Survey generational breakdowns:
Generation Z: (ages 18-22); younger Generation Y/millennials (ages 23-31); older Generation Y/millennials (ages 32-41); Generation X (ages 42-56); younger boomers (ages 57-66); older boomers (ages 67-75); and the silent generation (ages 76-96).
Source: National Association of Realtors
A favorite pastime of many buyers scrolling through real estate listings—or walking through an open house—is fantasizing about what life could be like in that home.
You might spot a swanky “Mad Men”–style bar that would be perfect for book club nights. Or maybe you’ll begin planning the feasts you could whip up with that six-burner stove! And what about the garden’s burbling fountain? Ah, that sound would be perfect for falling asleep to every night.
But here’s the thing every buyer should know: When it comes to house hunting, what you see isn’t necessarily what you get. Indeed a seller can rightfully haul off some items you may think automatically come with a house you purchase. So here’s a helpful reality check before your imagination runs too wild. (Bonus: We share tips to keeping some of those fixtures you absolutely love.)
What’s included in a home sale?
Precisely what comes with a home is not cut and dried, and each state has its own set of guidelines regarding this issue. But there are some guiding principles.
“If an item is attached, it is considered a fixture and by default should stay with the house,” says Dj Olhausen, an agent with Realty ONE Group in San Diego. “On the other hand, if an item is not attached, it may very well leave with the seller.”
If that still seems vague, “fixture” is a real estate term used to describe items that are physically attached to the house via nails, screws, bolts, glue, cement, or electrical wiring. Standard fixtures inside the home include ceiling fans, blinds, plumbing and heating elements, and built-in appliances. Outside the four walls, items that generally stay put include mailboxes, shutters, backyard office sheds, and in-ground landscaping.
You might assume a refrigerator that looks built-in stays with the house or that the sellers will take their kid’s swingset with them. That’s where the acronym MARIA can help you identify fixtures:
- Method of attachment: If you need tools to remove the item, it’s probably permanently attached and considered a fixture. That’s why curtain rods stay with the home, but the curtains—which can be easily slipped off—usually go with the seller.
- Adaptability: If an item is adapted to be an integral part of the home, even if it isn’t physically attached, it usually stays. Examples include garage remotes, pool covers, lightbulbs, and even a floating floor.
- Relationship of the parties: In a dispute over what stays, it comes down to whether the seller installed what appears to be a permanent fixture. So if a home has shutters, the buyer can argue those were meant to be a forever fixture and should stay behind.
- Intention: Similar to above, if it seems the homeowner intended for the object in question to be a permanent part of the property, it stays. For instance, a desk in a home office specifically built to fit into an alcove—even though it isn’t bolted down—could be deemed a fixture.
- Agreement: When in doubt, refer to the purchase agreement to determine what’s included in the sale and what isn’t.
Just keep in mind there are some common-sense exceptions to the definition of “attached to the property.” For example, let’s say the owners have a dresser that’s bolted to the wall to prevent it from toppling over on a toddler, or they have bookcases attached with earthquake straps to keep them from tipping over. In those cases, the actual furniture isn’t considered a fixture.
What about outside the home?
“In general, any object attached to the ground is considered a fixture, while anything that can be moved freely will be deemed personal property,” says Olhausen.
Still, when you are touring a home, it may not be apparent if something is attached or not.
“So when it comes to deciding if an outdoor item is viewed as a fixture or someone’s property, ask yourself if it can easily be removed without the use of tools,” says Olhausen.
For example, electric vehicles typically require hardwiring and electrical system upgrades for a charging station.
“I have found that some sellers are taking the connector [a portable, plug-in charger], but the electrical setup stays with the property,” says Wendy Gladson, a real estate consultant at Compass in Marina del Ray, CA.
Personal property that will definitely leave on moving day includes items like potted plants, sheds that lay freely on the ground, or any item that can be moved without being disassembled, according to Olhausen.
Everything is negotiable
You may really want that coat and shoe organization unit that fits perfectly in the entry hall or maybe that beer fridge in the man cave. So remember, there is wiggle room when it comes to what stays and what goes in a home sale.
However, the local housing market may dictate how far you get when you try to negotiate. In a cooler market, buyers have more leverage when asking for items. But you might not get the extras you want in a hot seller’s market.
If you’re still confused, don’t worry—you’re not on your own trying to figure out what stays or goes. Your buyer’s agent will know what fixture exclusions are explicitly stated in the multiple listing service, and will also help you negotiate for items you want.
“Just do not assume anything,” says Suzi Dailey an agent with Realty ONE Luxe, in Laguna Niguel, CA. “If you want something, it should be written into the contract.”
Source: Realtor.com, Lisa Marie Conklin
The coronavirus pandemic brought unprecedented hardship to renters, at one point leaving as many as 40 million people at risk of losing their homes.
That the situation got so bad, so quickly for tenants revealed long-lasting issues of housing instability in the U.S., caused by rapidly rising rents and stagnant wages, advocates say.
It also led to action.
Over the last two years, states and cities have passed dozens of laws granting tenants additional rights.
“The Covid pandemic has seen a new era of renter protections across the U.S.,” said Kshama Sawant, a member of the Seattle City Council.
“Facing this mountain of debt and a likely tsunami of evictions, tens of thousands of renters have responded by fighting back – organizing their buildings and uniting with tenants across cities and across the country,” she said.
Eviction rates were expected to balloon to historic levels during the public health crisis. Instead, they dropped off.
That reversal is due to the $45 billion pot of rental assistance allocated by Congress – for perspective, just $1.5 billion was earmarked for renters during the Great Recession – as well as the federal and local moratoriums on evictions, experts say.
The Centers for Disease Control and Prevention announced in September 2020 a nationwide ban on most evictions, and despite many legal challenges, that policy mostly remained in effect until this past August.
In the absence of a federal eviction ban, many states and cities have kept their own limits on the proceedings in place, currently leaving half of renters in the U.S. with some protections against displacement.
New Jersey and New York’s eviction moratoriums will last until January 2022. Los Angeles, Seattle and Austin also still have citywide bans in effect.
Meanwhile, since federal rental assistance has been slow to reach people, Oregon, Massachusetts, Michigan, Minnesota, Nevada and Washington, D.C., allow renters to temporarily pause an eviction against them if they can show that they’re in the process of applying for the aid.
Before the pandemic, the federal government had never issued a countrywide ban on evictions. Locally, after certain natural disasters and the Sept. 11 terror attack, governors and courts announced just one week or two week-moratoriums.
A new era for renters
Other nascent policies will likely outlive the pandemic, and aim to address deep-rooted problems for renters.
Before Covid, 1 in 2 renters in the U.S. were considered rent-burdened, meaning a third or more of their income went to their housing, according to the Government Accountability Office. Many tenants spent over half of their earnings on their rent, research shows.
Vicente Sarmiento, the mayor of Santa Ana, California, said his city has lost more than 20,000 residents over the last decade, largely due to rising housing costs. The current population is around 330,000.
“People are still working here, but they can’t afford to live here,” Sarmiento said.
The city in October passed a bill limiting rent increases in most buildings to no more than 3% during any 12-month period, or 80% of the consumer price index change for the year, whichever is less. (If there’s no inflation in a year, rents can’t go up at all.)
Tenant advocates had been rallying support for the policy, which went into effect Nov. 19, for years, Sarmiento said. The hardship caused by the pandemic, he said, was the final push.
“I saw this desperation from residents who realized they couldn’t sustain these increases,” he said.
Meanwhile, residents in Saint Paul, Minnesota, voted this month in favor of a rent control policy that will also limit increases to 3% a year.WATCH NOWVIDEO13:26How evictions work in the U.S.
In September, legislators in Seattle passed a bill requiring landlords to pay the moving costs for tenants who can’t afford to stay in their homes after their rent is increased by 10%, or more. The policy, which was modelled after a similar one in Portland, Oregon, will go into effect in July.
“The new law will become a bulwark against the epidemic of what’s known as ‘economic eviction’ – a landlord pushing a tenant out by increasing rent by outrageous amounts ,” said Sawant, whose office introduced the bill. Rents have soared by nearly 70% in Seattle since 2010.
“This just shows that the private market has utterly failed to meet the needs of ordinary people,” she said.
Her office has also introduced legislation to cap rent increases in Seattle. “We won’t stop until we win full rent control,” Sawant said.The Covid pandemic has seen a new era of renter protections across the U.S.Kshama SawantMEMBER OF THE SEATTLE CITY COUNCIL
Landlord groups and some economists criticize rent control.
“These policies interfere with a housing provider’s ability to respond to economic and operational needs and hurt local communities by driving out existing housing providers and dis-incentivizing development of new housing,” said Greg Brown, senior vice president of government affairs at the National Apartment Association.
But it’s rising rents, Sarmiento said, that is most endangering Santa Ana.
“It really destabilizes our economic health,” he said. “If you’re having to spend 70% of your wages on rent, you’re not buying goods and services in the community. People aren’t shopping.”
The pandemic has also accelerated the movement to get renters free legal representation.
Housing advocates have long complained that most landlords show up to eviction hearings with a lawyer, while tenants usually can’t afford one.
Over the course of the pandemic, seven cities (Boulder, Baltimore, Denver, Seattle, Louisville, Minneapolis and Toledo), and three states (Washington, Connecticut and Maryland) passed legislation guaranteeing renters at risk of eviction the right to legal representation.
“It was an unbelievable confluence,” said John Pollock, coordinator of the National Coalition for a Civil Right to Counsel.
Source: CNBC, Annie Nova
As home buyers continue their searches in an active and competitive fall season, the nation’s top-performing markets in October are all affordable alternatives to their nearby big-city counterparts.
Topping realtor.com®’s October list was Manchester, N.H., about an hour northwest of Boston. Homes in Manchester are selling in under 24 days—about 21 days faster than the overall housing market. Properties there are receiving about 2.8 times as many views on realtor.com®.
“Affordability and strong local economies remain very much top-of-mind for today’s buyers,” says George Ratiu, manager of economic research at realtor.com®. “With home prices reaching record levels this year, many buyers are still finding themselves locked out of expensive cities. Many of the markets on our list are small to mid-sized within a reasonable commute distance of a major employment center but with much more affordable home prices.”
Realtor.com® identifies the top-performing housing markets each month by pinpointing which areas have seen the quickest sales and fetched the most views at its site. The average median list price in the 20 markets topping its list in October is nearly 16% lower than the median price nationally. Homes on the list were a median of $320,000 compared to the nationwide median home price of $380,000, realtor.com® says.
Here are the 15 markets that topped realtor.com®’s October list:
- Manchester, N.H.: $419,000 (median listing price)
- Burlington, N.C.: $295,000
- Eureka, Calif.: $489,000
- Rochester, N.Y.: $211,000
- Elkhart, Ind.: $219,900
- Lafayette, Ind.: $227,500
- Fort Wayne, Ind.: $224,900
- Johnson City, Tenn.: $300,000
- Jefferson City, Mo.: $179,900
- Rapid City, S.D.: $386,000
- Raleigh, N.C.: $425,000
- Topeka, Kan.: $175,000
- Concord, N.H.: $389,900
- Springfield, Mass.: $310,000
- Worcester, Mass.: $399,000
Source: Realtor Magazine
All-cash purchases rose to their highest level since the first quarter of 2015, according to a new report released by ATTOM Data Solutions, a real estate data firm. All-cash purchases comprised 34% of all single-family house and condo sales in the third quarter. In some markets, all-cash transactions represented more than half of sales.
Cash sales represented the largest share of all transactions in the third quarter in Columbus, Ga. (74.6% of all sales); Atlanta (69%); Macon, Ga. (59.3%); Youngstown, Ohio (56.6%); and Detroit (56.2%), according to ATTOM Data Solutions.
All-cash sales have risen the most in Atlanta and Detroit over the last year.
Some Buyers Using iBuyer Backing to Make All-Cash Offers
Institutional investors—who tend to make up the bulk of cash transactions—reached their highest level in the market since the first quarter of 2014, according to ATTOM Data Solutions. They accounted for 7.3% of all single-family house and condo purchases in the third quarter. The states with the largest percentages of sales to institutional investors in the third quarter were Arizona (17.4% of all sales); Georgia (13.9%); and Mississippi (12.8%).
Source: ATTOM Data Solutions
Older buyers seeking smaller or easier-to-maintain homes are crashing into younger buyers in a housing market where the competition is fierce.
Soaring home prices and new construction favoring bigger builds have interrupted traditional patterns of homeownership for buyers across the country. Smaller houses, desired by aging seniors and young couples alike, are among the toughest to find. The supply of homes up to 1,400 square feet is near a five-decade low, according to data from Freddie Mac.
In 2020, about 28% of real-estate transactions could be characterized as downsizing, said Lawrence Yun, chief economist at the National Association of Realtors. The majority of these transactions are made by buyers 55 or older.
“We have a housing shortage,” Mr. Yun said. “Clearly from the age patterns, young people want to upsize, and the older generation is looking to downsize, but not greatly—only 100 or 200 square feet smaller than where they’d been living.”
The typical housing cycle for many families—kids go off to school, household sizes shrink, empty-nesters hand off their family homes to new households raising their own children—has been disrupted in recent years, said Len Kiefer, deputy chief economist at the mortgage giant Freddie Mac. The large baby boomer population outnumbers the rising Gen X-ers, who would be the ones to traditionally take over the family homes.
Many boomers want to “age in place,” meaning living in their original home independently into their later years. A 2018 survey of 2,287 adults from the AARP shows seniors would prefer to stay in the communities where they already live.
“They like their grocery store, they like their doctor, they like their local options,” said Karan Kaul, senior research associate at the Urban Institute.
Once they decide to move to a smaller home, they end up competing with first-time buyers and limited supply, Mr. Kiefer said. Price growth has been strongest for smaller, less-expensive homes. “That works against you in terms of what you can get for your buck,” Mr. Kiefer said.
If they haven’t paid off their mortgage, older buyers might find they could sell their current home at a high price but then pay more in mortgage payments on a smaller place. The share of older homeowners with debt has steadily increased over the past decade, rising to 55.4% in 2019 from 33.2% in 2007. This rise is driven in large part by mortgage debt, according to data from the Urban Institute.
After retiring from working at the New York Department of Education for 33 years, Enid Maldonado-Salgado started to make a plan to move from her current home in Flushing, in New York City’s Queens borough, to further east on Long Island, where she and her husband can be closer to family.
The 60-year-old worked with a Realtor for a year before retirement. Ms. Maldonado-Salgado said her goal was to find a home valued at 80% of her current home’s worth. She found the house-hunting process difficult, even with the money she had saved from refinancing her existing home and the substantial profit she expects from selling it.
For Ms. Maldonado-Salgado, downsizing meant finding an affordable home that wouldn’t require too much maintenance or upkeep. She wanted the freedom to travel and to be closer to her grandchildren.
Ms. Maldonado-Salgado is now in the process of closing on a new house in Smithtown. The new house is nearly equal in square footage to her house in Queens.
“It wasn’t about finding something smaller, it was about finding something that benefited my budget,” she said. “We wanted to make things simpler for ourselves.”
Source: Realtor News, Julia Carpenter
Oct 15 (Reuters) – Close to half a million low-income homeowners in the United States, many of them minorities, are nearing the end of mortgage forbearance plans that allowed them to halt loan payments during the pandemic, presenting a test for the mortgage service firms tasked with helping struggling borrowers move onto payment plans they can afford.
The number of borrowers exiting the plans is expected to surge over coming weeks as people who signed up early on in the pandemic reach the 18-month limit for forbearance. While close to 80% of homeowners who entered programs at some point inthe pandemic have since exited them, the remaining 20% tend to live in areas with higher shares of minorities, or have lower credit scores and lower incomes, research shows.
Their missed payments could add up to a “forbearance overhang” of more than $15 billion in postponed mortgage payments, or about $14,200 per person, according to Brookings Institution research.
“When coupled with unemployment insurance expiring and other things happening at the same time, it’s not clear that these folks will have an easy time coming out of this,” said Amit Seru, a professor at Stanford Graduate School of Business and a senior fellow at the Hoover Institution.
Many borrowers will be able to push missed payments to the end of their loans, and others will be able to capitalize on a hot housing market to refinance or even sell their homes. Homeowners facing hardships who signed up for forbearance in later months may still be eligible for additional extensions. read more
RACIAL GAPS WORSENED
The pandemic worsened racial disparities among homeowners. Black and Hispanic homeowners, disproportionately affected by pandemic-related job losses, were 30% more likely to fall behind on mortgages than the average borrower in the early months of the crisis, between April and November of 2020, according to the Federal Reserve Bank of Philadelphia.
Some 7.6 million borrowers have been in forbearance at some point during the pandemic, representing about 15% of all mortgage holders, and about 1.25 million borrowers were still in forbearance plans in mid-October, according to Black Knight, a mortgage technology and data provider.
It estimates that about 850,000 homeowners who participated in forbearance were in plans set to expire by the end of this year, including those who already exhausted their options. Roughly half of those homeowners have loans backed by the Federal Housing Administration or the Department of Veterans Affairs.
Those loans, which often require smaller down payments and lower credit scores, are disproportionately used by low-income borrowers, first-time home buyers and minorities. FHA loans, for example, were used by 37% of minority home buyers in 2019, according to the Department of Housing and Urban Development.
How easily those homeowners are moved into other plans after their forbearance programs end will be monitored by regulators and others in the weeks ahead.
“We’re going to watch closely,” said Mark McArdle, assistant director of mortgage markets at the Consumer Financial Protection Bureau.
The CFPB ramped up scrutiny of mortgage servicers over the matter this spring and in June finalized new protections for homeowners struggling to make mortgage payments due to the pandemic. Still, foreclosures will be allowed to resume once those extra protections have been met. read more
The process can be mystifying.
Soon after forbearance ended for Marvin Williams in August, he learned his loan would be transferred to another servicer.
For longer than a month, Williams said it was not clear if the new company would defer his missed mortgage payments – adding up to at least $8,000 – to the end of his loan or if he would have to pay it back sooner.
Williams, 63, said he often endured two-hour waits on the phone when trying to get in touch with the servicer. On Wednesday, the housing counselor helping him with his case was told the payments would be deferred, but Williams said he is still waiting for written confirmation. “I’m trying to hope that I’m in the right place with this,” said Williams, who lives outside Rochester, New York.
Borrowers exiting forbearance can generally choose between resuming payments and having the deferred debt tacked on to the end of their mortgage; having loans modified so monthly payments are reduced; or paying back the debt by selling the home or refinancing.
The pace of forbearance exits increased in September and is expected to hit the highest pace in more than a year over the next few weeks, said Mike Fratantoni, a senior vice president and chief economist for the Mortgage Bankers Association.
Mortgage service firms hired more workers and are “well prepared” for the higher case load, Fratantoni said. “It is such a stark comparison to what happened a decade ago where coming out the great financial crisis everyone was just so frustrated with the pace of resolution.”
This time, servicers – who receive payments from borrowers and disburse them to investors, tax authorities and insurers – have simplified the process for moving to alternatives so that homeowners need to provide little or no additional documentation.
About 35% of borrowers who exited forbearance in September resumed paying and deferred missed payments to the end of their loan, according to the MBA. About 28% modified their loans and 19% exited without a plan in place, including many still working toward a loan modification, said Fratantoni.
The boom in home prices, up over 30% since the pandemic began, may help. About 93% of borrowers in forbearance have at least 10% equity in their homes even after 18 months of missed payments, according to Black Knight. After the Great Recession, by contrast, 28% of borrowers owed more on their mortgages than their homes were worth.
Reporting by Jonnelle Marte in New York and Katanga Johnson in Washington; Editing by Dan Burns and Andrea Ricci
Sales of new single family homes fell to an annualized rate of 676,000, 6.6% below May’s rate of 724,000 and 19.4% below the June 2020 level of 839,000. Analysts were expecting new home sales to increase by 3.4% in June.
After a year of frenzied buying and price gains in the double digits, newly built homes are now out of reach for much of the demand that remains in the market.
The median price of a newly built home in June rose just 6% from June 2020, and while that is a large gain historically, it is nothing compared with the 15%-20% annual gains seen in previous months.
Most of the homebuying is on the higher end of the market, and builders cannot afford to put up affordable homes due to skyrocketing construction costs.
Softwood lumber, in particular, spiked more than 300% during the pandemic, and while it has fallen back dramatically in the last month, it is still about 75% above its 2019 average. Other lumber products are still significantly more expensive.
“We also know there are shortages of appliances, labor and affordable lots,” noted Peter Boockvar, chief investment officer at the Bleakley Advisory Group. “The moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays.”
“Annual comparisons will get even more difficult in coming months, as it was this time last year that the market began to surge and reach highs not seen since before the Great Recession,” wrote Zillow economist Matthew Speakman in a release.
Buyers in June were also hit with higher mortgage rates, which spiked about a quarter of a percentage point during the month. While that may not sound like a lot, if buyers are already stretched by higher home prices, they have less of a financial cushion to absorb higher mortgage rates.
Single family housing starts continue to gain, albeit slowly and not on the lowest end of the market. Permits, an indicator of future construction, are not as robust as the market needs.
While there is unquestionably still strong demand from buyers, much of it is being squelched by affordability and supply issues. Those signs clearly showed up at builder home sites in June and have been a factor in weakening homebuilder sentiment for the past two months. Noted builder analyst Ivy Zelman wrote as much in a note last month.
“We are shifting our tone on the housing market based on our analysis of proprietary data showing early signs of a cool down,” according to the note.