Susan Trotta

Summer of the Speed Buyer

Remember when it could take years to sell a home? Multiple listing service listings were flooded with distressed properties. In Miami, it was up to six years, according to news accounts in the wake of the 2008 financial crisis.

by Lawrence Yun

Today, of course, it’s the opposite story. It’s generally taking just a couple of weeks, and sometimes days, to find a buyer. From listing to contract, homes typically sold in 17 days in April, the fastest rate ever. In most markets, home buyers can’t risk leisurely weighing several listings before committing to likely the most expensive purchase of their life. Rushed decisions can easily lead to buyer misgivings—about overspending for the home, its size, or having insufficient reserves for upkeep. Still, most buyers come to see they made the right decision in these competitive times. Seeing prices, and hence their wealth, rising helps.

Could it all crash as happened from 2008 to 2010? Not likely. The current housing cycle is fundamentally different. We thankfully don’t have risky subprime mortgages that overstretched buyers’ budgets. The gatekeepers at banks, mortgage brokers, and government regulators demand that loan-to- value ratios, debt-to-income ratios, and income documentation meet guidelines before a mortgage is approved. To be sure, even with soundly written mortgages, we know some defaults can occur.

A second major difference is supply. Leading up to the housing bubble heyday, builders overbuilt. By my calculations, America had 2.1 million surplus housing units by 2006. Following the crash, underproduction steadily chipped away at the surplus, such that inventory normalized by 2011. Continuing underpro- duction led to the housing shortage. By 2015, the shortfall was 2 million homes. By the end of 2020, it totaled 4.8 million homes. The lack of inventory is why home prices are in no danger of falling sharply.

Homebuilding activity in 2021 will be slightly above historical norms. But it will take at least a few years to correct the massive shortage. In the meantime, we expect the national median home price to rise 9% this year and another 3% in 2022. Hyperspeed homebuying should taper off by year’s end as supply improves and affordability challenges persist.

Months’ Supply Continues at Record Lows

Sales slowed as listing shortages persisted in April. The low 2.4 months’ supply of inventory was the highest so far in 2021, though 40% down from a year earlier.

 

 

Lawrence Yun, Chief Economist and Senior Vice President of Research at the National Association of REALTORS®.  MAGAZINE.REALTOR

The Transformation of the Garage

Homeowners who want to expand their livable space are finding ways to use the garage for more than parking.

by Melissa Dittmann Tracey

Since the pandemic began, homeowners have had to figure out how to make every square inch of their properties usable. Lately, they’re looking to the garage, adding functionality to the space besides just for parking. The garage also could serve as a gym, play area, or home office.

Aaron Cash, cofounder of home improvement firm Garage Living, says homeowners are taking a particular interest in renovating the garage because it’s often the largest open area in their home. Cash says the most common requests he receives from customers involve making the garage more functional and multipurpose, adding storage or a hobby area.

In 2020, Garage Living completed 5,200 garage makeovers, up from 3,800 in 2019. The company is on track this year to complete 7,500 projects.

The garage—which buyers named as one of their top five home features in a realtor.com® survey earlier this year—also can be used as a place to host open-air events.

Cash recommends two common ways to renovate a garage without a complete overhaul:

  • Refinish the typically cold flooring in the garage to make it feel more livable. For example, Garage Living offers Floortex, which is a five-step coating process to dress up the floor.

  • Add cabinetry, wire shelving, or wall-mounted organizers to reduce clutter, which commonly builds in garages. Cash advises using the extra storage for everything from sporting equipment to seasonal decorations.

View some of these garage transformations from Garage Living.

Photo courtesy Garage Living

Photo courtesy Garage Living

Photo courtesy Garage Living

Photo courtesy Garage Living

Photo courtesy Garage Living

 

Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine

A Third of Americans Say Their Dream Home Is Attainable

©gorodenkoff - Getty Images

One in three consumers believes their dream home is financially attainable one day, according to a new survey from Buildworld, an international company that offers building materials. Millennials are the most optimistic, with about 38% believing they’ll one day buy their dream home, while Gen Z is the least optimistic at about 19%.

What makes a dream home? Buildworld recently surveyed 1,000 consumers in the U.S. and United Kingdom to find out.

Here are some highlights from the study.

Exteriors and Interior Home Preferences

Modern farmhouse exterior styles and a rustic modern interior were among the most popular.

One in five consumers called the modern farmhouse their “dream home.” A modern farmhouse combines contemporary style with a farmhouse aesthetic.

Inside, rustic modern was the most popular interior style. It includes modern furniture with preserved and natural architectural features, an open floor, and lots of light, Buildworld notes.

Age groups tended to show slightly different preferences for interiors and exteriors.

Most Desired Amenities

Outdoor home features have gotten more priority since the pandemic, such as gardens, patios, and porch spaces.

Overall, the must-have home features among U.S. respondents for a dream home were: a garden, garage, patio or porch, natural light, and a primary suite with a bathroom.

Buildworld’s survey revealed the following amenities created a dream home for most respondents.

 

 

Courtesy: Realtor Magazine

 

Mortgage Costs Grow 20 Times Faster Than Incomes

Housing affordability continues to decline as the hot real estate market fuels skyrocketing prices. Incomes aren’t keeping pace with the higher prices.

© malerapaso - iStock/Getty Images Plus

The median family income rose by 1.2% in May while the monthly mortgage payment jumped by 20%, according to the National Association of REALTORS®’ Housing Affordability Index.

Even as mortgage rates are down compared to a year ago—which has helped buyers save on borrowing costs—the median existing-home price has jumped 24.4% compared to the same period.

Monthly mortgage payments increased to $1,204 in May, a 20% jump compared to a year earlier. NAR’s analysis notes the annual mortgage payment—as a percentage of income—increased to 16.5% over the past year due to higher home prices and a decline in median family incomes.

Homeowners in the West have the highest mortgage payments to income share at 22.1% of income. Home prices in the West have climbed to a record high of $513,700.

The most affordable region of the U.S. in housing continues to be the Midwest, in which the median family income is $86,440. NAR’s index calculates a qualifying income as the income required to afford a mortgage so that payments are no more than 25% of a family’s income. The Midwest had a qualifying income of $44,016.

 

Source: “Housing Affordability Falls in May as Home Prices Rise Faster Than Income,” National Association of REALTORS® Economists’ Outlook blog (July 9, 2021)

5 Mortgage Trends To Watch

Understanding key financing issues affecting homebuyers in their purchasing decision.

by Melissa Dittmann Tracey

Buyers have fueled a red-hot housing market over the last year as they rushed to secure record-low mortgage rates. But shifts are underway, which may affect borrowers planning for their next home.

  1. Rising rates. “Interest rates below 3% on a 30-year fixed-rate mortgage aren’t likely to be around long,” says Lawrence Yun, chief economist of the National Association of REALTORS®. Rising inflation and a strengthening economy are expected to push rates up. Yun predicts that by as early as year’s end—but likely by next spring—30-year fixed-rate loans will average 3.5%. Higher rates and home prices could push some would-be buyers out of the market.

  2. Strict qualifications. Lending standards tightened during the COVID-19 pandemic as lenders looked to avert risk, notes Tendayi Kapfidze, chief economist at LendingTree. Standards could ease a bit as the economy keeps improving and refinancings become a smaller share of total mortgage lending, says Guy Cecala, publisher of Inside Mortgage Finance. Still, the most favorable rates will go to borrowers with stellar credit histories—scores of 750 and above—and large down payments. Lending criteria in the hot vacation and second-home market could be a different story. Due to tightened underwriting criteria, second-home buyers could face steeper rates.

  3. Larger mortgages. Higher home prices are leading to larger loan amounts. In March, the average mortgage taken out on a new-home purchase reached a record-setting $374,000, up from about $332,000, two years earlier, according to the Mortgage Bankers Association. As more people upsized their space in the pandemic, sales in upper price brackets outpaced those at lower price points. Applications for mortgages larger than $766,000 jumped 55% year over year in February, the largest jump in any price range, according to the Mortgage Bankers Association. By contrast, mortgages in the $150,000–$300,000 range decreased by 2%.

  4. More nonbank lending. Borrowers have more options as nonbank lenders gain market share. “Nonbanks are competing more on rates and underwriting than banks have been, and that’s particularly been true over the past year,” Cecala says. “That likely will continue. As of now, banks appear to be content competing from the sidelines.” The top five U.S. banks—Wells Fargo, Bank of America, JPMorgan Chase, US Bancorp, and Citigroup—comprised only 21% of total mortgage originations last year, a decline from their 50% combined market share in 2011, according to Business Insider Intelligence’s Online Mortgage Lending Report. Alternative lenders are offering traditional financial products often at lower costs, with more relaxed eligibility criteria, and expanded digital options in loan processing. Quicken Loans (now known as Rocket Mortgage) issued the highest dollar amount of single-family loans in 2020, according to an analysis of 2020 Home Mortgage Disclosure Act data.

  5. Rate lock-in effect. Some owners aren’t selling because they don’t want to give up their existing ultra-low interest rate, thus squeezing supply and placing upward pressure on home pricing, Kapfidze says, adding “this could be a challenge to the housing market going forward.” But Yun offers a broader view, noting that mortgage rates aren’t the only factor potential sellers consider. Some seek more space or the new flexibility to work remotely and live anywhere.

 

Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine. 

Alternative Ways to Hanging Artwork

Artists provide creative methods for hanging your masterpieces that won't ruin your walls. 

CREDIT: D3SIGN / GETTY IMAGES

By Brigitt Earley,

If you're starting to build a collection of art, chances are you want to display your investments proudly. Otherwise, maybe you simply want to show off your favorite family photos. Whether photos or paintings, wall hangings have the profound ability to pull a space together in an instant. But what if you rent your place and have to keep the drywall intact or have intricate millwork that you don't want to mar with nail holes? You aren't relegated to a world with drab white walls. There are plenty of ways to hang artwork without making a single hole in the wall. 

The most common way to hang artwork without nails is by using Command Strips. You simply plan how you want to arrange your picture, then apply one half of the hook and latch strip to the wall and the other to the frame. Then, you stick them together to secure the picture or painting to the wall. When you go to remove them, they don't cause any damage to paint or drywall.

To go beyond this common hack for hanging artwork, we asked the pros—artists, DIY experts, and interior designers—for other creative solutions. Here's what they had to say.

Magnetic Paint 

To design a gallery wall that can be rearranged on a whim, use Rust-Oleum Magnetic Paint and adhesive-backed magnets to the back of lightweight prints or photo frames, says Audrey Van de Castle, manager of Stanley Black & Decker's Maker Initiatives. You can even try painting the magnetic paint in fun accent shapes around the artwork.

Display Easel 

Try showing off larger paintings on a display easel, says artist Corey Paige. "No matter what the piece you're displaying is, it automatically adds a unique touch to your space," she explains. "You don't typically expect to walk into someone's home and see art displayed on an easel—it's always a conversation starter, since it highlights the art."

String and Clothespins 

Another option? Use tape or mounting putty to string a piece of twine across your wall, then use decorative clips or clothespins to display prints along the line, says Van de Castle.

Suspended from the Ceiling 

If you have tricky wainscot or tiled walls, drive hooks into the ceiling instead, says Lindsay Pumpa, owner of L Pumpa Designs. Then, you can use rope, leather, or chains to suspend the framed artwork.

Wire Grid 

If you're looking to occupy more vertical space, a wire grid is another method that's perfect for your desk area, says Paige. Simply use clothespins to attach your favorite prints or photos.

Ladder Shelves 

Framed prints look great displayed on a ladder shelf, since leaning art is a great way to add dimension to a room, says Paige. Simply frame your artwork and prop it on the shelf. If your ladder shelf leans against a wall, you can display a larger framed print on the top shelf.

Room Divider 

Another fun way to arrange small works of art into a sort of gallery wall? On a folding screen or room divider, says Pumpa. This serves as an excellent way to divide a studio apartment into multiple "rooms," while also creating a cool focal point.

 

Brigitt Earley is a freelance writer and editor based in New Jersey. Her work has been published in a wide range of women's lifestyle magazines, including Martha Stewart, Real Simple and Oprah.

Top 10 Issues Affecting Real Estate in 2021

Remote work and mobility are expected to have the most significant impact on real estate over the next year, according to The Counselors of Real Estate’s list. The group identified current and emerging issues expected to have an influence over real estate in the 2021-2022 cycle. Remote work and mobility and its influence over commercial buildings globally was named as the top issue, followed by technology and ESG (Environment, Social, and Governance).

“The pandemic was a stress test, revealing vulnerabilities, appetites, and new and increased risks,” says Michel Couillard, global chair of The Counselors of Real Estate. “These themes present themselves in the 2021-2022 Top Ten Issues, which are highly interconnected and indicative of a newly changed and further evolving real estate environment. We have been awakened to some familiar but nascent areas of importance, namely cybersecurity, supply chain, and price instability. None of these are new concepts, but in a span of months or even just weeks, we saw high profile hacks, shortages of resources like microchips, lumber and labor, and rising prices across the board.”

Here’s a closer look at the top 10 issues on CRE’s list for 2021-2022:

1. Remote work and mobility

The pandemic greatly disrupted the workplace as many employees began to work remotely—and still are more than a year later. Commercial properties may need to be repositioned as the workplace adapts to more flexible and even shareable spaces.

“As we emerge from COVID-19 into a new world replete with local and global disruptions alike, our industry has been forced to recognize that adaptability and resiliency are paramount in real estate markets,” says Couillard. “It is undeniable that the pandemic’s disruption significantly impacted human behavior in how and where people have chosen to work. Now, with an escalating return to ‘business as usual,’ and workers beginning to return to offices, landlords, and companies nevertheless are facing repositioning of the workspace and the benefit of easily adaptable and shareable spaces. …. Property owners and managers should be flexible in order to accommodate these demand-driven changes in the desired use and location of space."

2. Technology acceleration and innovation

The Counselors of Real Estate also ranked the acceleration and adoption of technology as having the second greatest impact on the real estate industry. “The stressors were not about new tech, but about the acceptance of it,” Coulliard says. “Lockdown-driven changes in our work, the economy, in social structures, and in our personal behavior forced the industry to put any earlier reluctance aside.” Growing technology themes include artificial intelligence, machine learning, the Internet of Things, and cybersecurity, the report notes.

3. ESG at a tipping point

Environmental, social, and governance (ESG) initiatives are growing. In 2020, ESG funds more than doubled net new money intakes. “The growth in recent years is fueled by multiple drivers, including consumer shifts, regulatory requirements, trillions of dollars of wealth transferring to generation Z and millennials committed to philanthropic living, a blurring of work and societal expectations, and a full sprint to attract and retain top talent,” the report notes.

4. Logistics

“Whether it’s a port, rail line, pipeline … manufacturing facility, warehouse, farm, ranch, or grocery store, all these real estate assets are a critical segment in the supply-chain funnel that is logistics,” the report notes. “How logistics is functioning impacts the utilization of commercial real estate. Redundancy and the ability to process disruption are two key elements required to support the fast-moving, high-volume requirements of modern-day logistics in the ‘shop-online-and-deliver-to-me’ era in which we find ourselves.”

5. Infrastructure

The Civil Engineers estimates the U.S. infrastructure funding gap in 2021 to be $2.6 trillion, a 24% increase compared to 2017. “The COVID-19 pandemic, climate change, and heightened societal interest in social and economic equity have redefined infrastructure imperatives beyond the significant ongoing necessity for improved roads, bridges, airports, ports, mass transit, and other traditional infrastructure needs,” the report notes. A proposal on Capitol Hill sets out to allocate $110 billion in new spending to bridges and roads, $65 billion to expanding access to broadband, and $48.5 billion to public transit, and more.

6. Housing supply and affordability

The National Association of REALTORS® and the Rosen Consulting Group released a report last week calling for a “once-in-a-generation” response to address decades of underinvestment and underbuilding in the housing market. The nation has faced a shortfall of 5.5 million to 6.8 million housing units since 2001, according to the report. Housing groups are calling on lawmakers to expand access to resources, remove barriers to incentivize new development, and more. 

7. Political polarization

“Political friction is holding back America’s economic productivity,” the report notes. “We are squandering resources as we try to address problems that arise from the partisan divide rather than problems confronting us as common issues …. And the real estate industry’s well-being is a function of our economic growth.”

8. Economic structural change

Economic growth is mostly an unknown. As the report notes, how do we assess the real potential of the economy for sustainable growth? What numbers indicate a true trend and which are merely adjustments from the low bottom of the second quarter of 2020? Which behavioral changes made by U.S. households in the pandemic will persist? The ability for businesses to anticipate what’s next is met with challenges. For example, “even though real estate investors may reasonably expect an uptick in demand in the coming year, the ability to anticipate when occupancy and rent will rise frustrates underwriting,” the report notes. “We are observing many investors increasing their focus on property management aimed at retaining tenants and defending cash flow, while selectively seeking ‘value-add’ properties amenable to active asset management. The thinking is ‘focus on what you can control’ during this period where macro-level uncertainty is the governing headwind at the policy level in terms of the structural problems in this economy.”

9. Adaptive Reuse 2.0

The term is not new but the focus is getting bigger. CRE refers to Adaptive Reuse 2.0 as “The Neighborhood Approach.” It aims to address the challenges of what to do with defunct suburban malls and thousands of empty big-box retail stores that are surrounded by desirable and affordable neighborhoods. It requires a re-examination of suburban communities in repositioning and transforming areas that could be at risk for blight. A number of projects have been completed or are underway to help reconnect communities, prevent blight, and restore green space.

10. Bifurcation of capital markets

Debt capital markets have been volatile since the pandemic, namely public markets like commercial mortgage-backed securities, mortgage REITs, and agencies such as Freddie Mac and Fannie Mae. “Mortgage REITs took a significant hit early in the pandemic, with some recent recovery driven by restructuring credit lines and paying down credit facilities that experienced margin calls,” the report notes. Still, the “market continues to be flush with debt capital liquidity, despite property type and market uncertainty. Looking out to the remainder of 2021 and into 2022, performance will dictate the amount of distress and losses, and risk management should dictate markets, property types, leverage, loan structure, and pricing for mortgage debt. The next year should also tell us if commercial real estate debt was too rich and whether perceived risk underestimated where pricing should have been.”

 

Source: The Counselors of Real Estate

Happy 4th of July!

 

Independence Day (colloquially the Fourth of July or           July 4) is a federal holiday in the United States.  It commemorates the Declaration of Independence of the United States, on July 4, 1776.

The Continental Congress declared that the thirteen American colonies were no longer subject (and subordinate) to the monarch of Britain, King George III, and were now united, free, and independent states. The Congress had voted to declare independence two days earlier, on July 2, but it was not declared until July 4.

  

Wolfeboro Independence Day Parade

   

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Location: Main Street, Wolfeboro, NH
Sponsor: American Legion Post #18

 

Mortgage Rates Rise Above 3%

For the first time in 10 weeks, mortgage rates inched above 3%—and the era of 2% rates may be over. “As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, Freddie Mac’s chief economist. “For those homeowners who have not yet refinanced—and there remain many borrowers who could benefit from doing so—now is the time.”

© ATU Images - The Image Bank/Getty Images

The National Association of REALTORS® has predicted that mortgage rates will average 3.2% by the end of the year.

Freddie Mac reports the following national averages with mortgage rates for the week ending June 24:

  • 30-year fixed-rate mortgages: averaged 3.02%, with an average 0.7 point, rising from last week’s 2.93% average. A year ago, 30-year rates averaged 3.13%.

  • 15-year fixed-rate mortgages: averaged 2.34%, with an average 0.7 point, increasing from last week’s 2.24% average. A year ago, 15-year rates averaged 2.59%.

  • 5-year hybrid adjustable-rate mortgages: averaged 2.53%, with an average 0.3 point, up slightly from last week’s 2.52% average. Last year at this time, 5-year ARMs averaged 3.08%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront cost of obtaining a mortgage.

Source: Freddie Mac