Mid-Income Americans’ Equity Up $120K in 10 Years

Leave a comment April 19, 2023 LaurelMurphyRE

Small paper house with coins stacked up beside it

Phawat Topaisan / EyeEm / Getty Images

APRIL 18, 2023 By Kerry Smith

NAR report cites Port St. Lucie for its homeownership rate of 83% for mid-income residents, and Ocala and Palm Bay for a Black ownership rate higher than 60%.

KANSAS CITY, Mo. – A new housing report by the National Association of Realtors® finds that middle-income homeowners accumulated $122,100 in wealth as their homes appreciated by 68% in the last 10 years.

The report, Wealth Gains by Income and Racial/Ethnic Group, speaks to the value agents and Realtors® bring to consumers when helping buy and sell homes that build generational wealth. NAR released the report during its 2023 Realtor Broker Summit.

Variations by income and race

The data found substantial variations in homeownership rates across different income and racial and ethnic groups. For instance, low-income homeowners were able to build $98,900 in wealth in the last decade from home price appreciation only, while upper-income households saw an increase of $150,800.

“This analysis shows how homeownership is a catalyst for building wealth for people from all walks of life,” says Lawrence Yun, NAR’s chief economist. “A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.”

Although Black homeowners experienced the smallest wealth gains among any other racial or ethnic group, Black homeowners accumulated over $115,000 in wealth in the last decade.

For the first time, NAR also identified the top 10 U.S. metros in which Black homeowners saw the largest wealth gains and homeownership rates over the last 10 years. They include:

Bellingham, Washington
Ocala, Florida
Palm Bay, Florida
Modesto, California
Greeley, Colorado
Charleston, South Carolina

In each metro, more than 60% of Black households own their home, and those owners accumulated more than $125,000 in wealth over the last decade.

Along with the wealth gains accumulated in the last decade, homeowners also saw their debt drop by 21%. Many homeowners were able to refinance and secure a rate lower than 4% in the months following the onset of COVID-19, Yun noted.

Homeowners generally gained more equity in areas with high-cost homes. No matter the income level, owners in expensive areas saw the largest wealth gains. In the San Jose metro, for example, low-income owners accumulated nearly $630,000 in the last decade, and middle-income owners gained $643,000. All of the top 10 areas with the largest wealth gains for low-income owners – surpassing $290,000 – were located in California.

In the top 10 areas with the highest homeownership rates for middle-income households, owners gained $110,000 in wealth on average in the last 10 years. In Ogden, Utah, for example, 85% of middle-income households own their home, and they’ve built nearly $220,000 in wealth in the last decade.

Some significant areas to note include Port St. Lucie, Florida, where the homeownership rate for middle-income households was 83%, and middle-income owners gained nearly $200,000 in wealth. The cities of Barnstable Town, Massachusetts and Palm Bay, Florida, were other areas where most middle-income households both owned their home and accumulated a substantial amount of wealth – over $170,000 – in the last decade.

In the areas with the highest homeownership rates for low-income households, wealth gains were $140,000 on average. NAR includes a number of Florida cities in its list of high equity gains for lower-income households. In Prescott, Arizona, more than 2 out of 3 low-income households (68%) own their own home, and owners have built more than $200,000 in wealth in the last decade.

Barnstable Town, Massachusetts, as well as the Florida cities of North Port, Port St. Lucie, Palm Bay and Deltona were other areas where most low-income households owned their home and accumulated a substantial amount of wealth – over $120,000 – in the last decade.

Leave a comment March 31, 2023 LaurelMurphyRE

Back of man starting at huge dollar bill with arrow in front heading lower

MARCH 30, 2023

Mortgage Rates Hit Lowest Level in 6 Weeks

By Matt Ott

At 6.32%, the average 30-year, fixed-rate mortgage declined from last week’s average 6.42% – a ray of hope for buyers seeking to secure a home this spring.

WASHINGTON – The average long-term U.S. mortgage rate inched down this week to its lowest level in six weeks, just as the spring buying season gets underway.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate fell for the third straight week to 6.32%, from 6.42% last week. The average rate a year ago was 4.67%.

The recent decline in mortgage rates is good news for prospective homebuyers, as many were pushed to the sidelines during the past year as the Federal Reserve cranked up its main borrowing rate nine straight times in a bid to bring down stubborn, four-decade high inflation.

Also helping buyers, home prices appear to be leveling off. The national median home price slipped 0.2% from February last year to $363,000, marking the first annual decline in 13 years, according to the National Association of Realtors.

One thing that hasn’t gotten much better is the supply of homes.

“Over the last several weeks, declining rates have brought borrowers back to the market, but as the spring home buying season gets underway, low inventory remains a key challenge for prospective buyers,” said Sam Khater, Freddie Mac’s chief economist.

Rising borrowing costs can add hundreds of dollars a month in costs for homebuyers and put the brakes on the housing market. Before surging 14.5% in February, sales of existing homes had fallen for 12 straight months to the slowest pace in more than a dozen years.

In 2022, existing U.S. home sales fell 17.8% from 2021, the weakest year for home sales since 2014 and the biggest annual decline since the housing crisis began in 2008, the National Association of Realtors reported earlier this year.

The average long-term rate hit 7.08% in the fall – a two-decade high – as the Federal Reserve quickly cranked up its key lending rate with multiple jumbo hikes in a bid to cool the economy and stymie persistent, four-decade high inflation.

In their latest quarterly economic projections, the policymakers forecast that they expect to raise that key rate just once more – from its new level of about 4.9% to 5.1%, the same peak they had projected in December.

While the Fed’s rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investor expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home.

Treasury yields have fluctuated wildly since the collapse of two mid-size U.S. banks two weeks ago. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, was 3.57% Thursday, but had been above 4% early in March.

The rate for a 15-year mortgage, popular with those refinancing their homes, fell this week to 5.56% from 5.68% last week. It was 3.83% one year ago.

Existing-Home Sales Surged 14.5% in February, Ending 12-Month Streak of Declines

Leave a comment March 22, 2023 LaurelMurphyRE

Largest monthly percentage increase since July 2020

March 21, 2023 Media Contact: Troy Green 202-383-1042
Read full NAR article

Key Highlights

Existing-home sales jumped 14.5% in February to a seasonally adjusted annual rate of 4.58 million, snapping a 12-month slide and representing the largest monthly percentage increase since July 2020 (+22.4%). Compared to one year ago, however, sales retreated 22.6%.
The median existing-home sales price decreased 0.2% from the previous year to $363,000.
The inventory of unsold existing homes was unchanged from the prior month at 980,000 at the end of February, or the equivalent of 2.6 months’ supply at the current monthly sales pace.

WASHINGTON (March 21, 2023) – Existing-home sales reversed a 12-month slide in February, registering the largest monthly percentage increase since July 2020, according to the National Association of REALTORS®. Month-over-month sales rose in all four major U.S. regions. All regions posted year-over-year declines.

Total existing-home sales,¹ https://www.nar.realtor/existing-home-sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – vaulted 14.5% from January to a seasonally adjusted annual rate of 4.58 million in February. Year-over-year, sales fell 22.6% (down from 5.92 million in February 2022).

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said NAR Chief Economist Lawrence Yun. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Total housing inventory² registered at the end of February was 980,000 units, identical to January and up 15.3% from one year ago (850,000). Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February 2022.

“Inventory levels are still at historic lows,” Yun added. “Consequently, multiple offers are returning on a good number of properties.”

The median existing-home price³ for all housing types in February was $363,000, a decline of 0.2% from February 2022 ($363,700), as prices climbed in the Midwest and South yet waned in the Northeast and West. This ends a streak of 131 consecutive months of year-over-year increases, the longest on record.

Properties typically remained on the market for 34 days in February, up from 33 days in January and 18 days in February 2022. Fifty-seven percent of homes sold in February were on the market for less than a month.

First-time buyers were responsible for 27% of sales in February, down from 31% in January and 29% in February 2022. NAR’s 2022 Profile of Home Buyers and Sellers – released in November 2022⁴ – found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.

All-cash sales accounted for 28% of transactions in February, down from 29% in January but up from 25% in February 2022.

Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in February, up from 16% in January but down from 19% in February 2022.

Distressed sales⁵ – foreclosures and short sales – represented 2% of sales in February, nearly identical to last month and one year ago.

According to Freddie Mac, the 30-year fixed-rate mortgage(link is external) averaged 6.60% as of March 16. That’s down from 6.73% from the previous week but up from 4.16% one year ago.

Read full NAR article

NAR: ‘Home Sales Are Bottoming Out’

Leave a comment February 27, 2023 LaurelMurphyRE

February 21, 2023 By: Melissa Dittmann Tracey

Spring is around the corner, and the signs are pointing to a pick-up in sales on the horizon. Read more from NAR’s latest housing report.

saleswoman greeting female customers while standing outside house

Existing-home sales continued to ease in January, marking a yearlong stretch of declines coming off pandemic-fueled highs. But median home prices still are rising.

Total existing-home sales—completed transactions that include single-family homes, townhomes, condos and co-ops—decreased 0.7% in January compared to December 2022, the National Association of REALTORS® reported Tuesday. Home sales are down nearly 37% compared to a year earlier (at a seasonally adjusted annual rate of 4 million in January).

But as mortgage rates begin to stabilize, economists are hopeful for a turnaround in sales activity for the housing market heading into spring.

“Home sales are bottoming out,” says Lawrence Yun, NAR’s chief economist. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

Overall, the median existing-home sales price nationwide rose 1.3% compared to a year ago, reaching $359,000, NAR reports. Home prices climbed in three out of the four major regions of the U.S., only falling in the West last month.

The supply of homes for sale continues to be tight in most markets across the country, helping to keep home prices higher. Still, total housing inventory rose 2.1% in January month-over-month and is up by 15.3% compared to a year ago. Unsold inventory, remains, at a brisk, 2.9-month supply at the current sales pace.

“Inventory remains low, but buyers are beginning to have better negotiating power,” Yun says. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”

Here’s a closer look at other key indicators from NAR’s latest housing report:
Days on the market: Fifty-four percent of homes sold in January were on the market for less than a month in January. On average, properties remained on the market for 33 days in January, up from 26 days in December and 19 days a year earlier.
First-time home buyers: As competition lessens, first-time home buyers are re-emerging. First-time buyers accounted for 31% of sales in January, up from 27% a year earlier.
All-cash sales: All-cash transactions comprised 29% of sales in January, up from 27% in January 2022. Individual investors and second-home buyers tend to make up the biggest bulk of all-cash sales. They purchased 16% of homes in January, down from 22% a year earlier.
Distressed sales: Foreclosures and short sales continue to make up a very small share of sales. Distressed sales accounted for 1% of sales in January, matching levels from a year earlier.

Regional Snapshot
Here’s how existing-home sales fared across the country in January:

Northeast: Existing-home sales fell 3.8% from December, reaching an annual rate of 500,000 in January. Sales were down nearly 36% from a year earlier. Median price: $383,000, up 0.3% from January 2022
Midwest: Sales decreased 5% compared to the previous month, reaching an annual rate of 960,000 in January. Sales were down 33.3% from one year ago. Median price: $252,300, up 2.7% from January 2022
South: Sales rose 1.1% in January compared to December, reaching an annual rate of 1.82 million. Sales are down nearly 37% from the prior year. Median price: $332,500, an increase of 3.4% from one year ago
West: Existing-home sales increased 2.9% in January, reaching an annual rate of 720,000, but still down 42.4% from the previous year. Median price: $525,200, down 4.6% from January 2022

Yes, You Should Buy a House This Year

Leave a comment February 7, 2023 LaurelMurphyRE

family on front porch of house holding sold sign

FEBRUARY 6, 2023

By Brian O’Connell

Buyers who wait for more inventory, lower interest rates or something else may never own a home. And given history, 2023 is a pretty good year to commit.

McDONOUGH, Ga. – Mortgage rates are finally falling across the fruited plains, with rates in the 5.6% range for a 30-year fixed mortgage not uncommon in early February. Couple that with declining home prices and an uptick in the residential real estate inventory, and it looks like the great American homebuyer finally has leverage after two years of home sellers calling the shots.

“2023 will be better for buyers,” said Magellan Realty LLC mortgage broker Alex Caras. “As the Federal Reserve keeps interest rates at the current levels, the buying market will start to open up more, reducing competition for existing homes.”

Construction woes brought on by the supply chain issues are also being eased, “so more new homes will be on the market,” Caras added.

Buyers getting an edge

Those are the macro reasons why U.S. homebuyers have a leg up going into the busy spring and summer real estate season. Buyers should have an edge thanks to these five realities, as well.

1. Mega-high prices are a thing of the past. “The price climbing we saw in 2020 and 2021 has hit a plateau,” said Guaranteed Rate Mortgage Senior Vice President of Lending Jennifer Beeston. “It took a good chunk of 2022 for many sellers to realize 2021 is long gone and they needed to be more realistic with the pricing and condition of their home.”

In addition, buyers see a return to a more balanced market in 2023. “Now, buyers actually can get inspections and can negotiate prices,” Beeston said. “That wasn’t the case with the drama of 2022.”

2. The Federal Reserve is hitting the brakes. The U.S. Federal Reserve is slowing down its policy of substantial interest rate increases that were prevalent in 2022.

“This means more buyers will be able to purchase a home at a lower rate,” Caras told TheStreet. “Home prices have been reduced to a more reasonable level as well, and this will continue for much of 2023 as the competition to purchase homes has lessened.”

3. The pandemic is over. Buyers will have an opportunity to negotiate again in 2023 and even more so in 2024.

“We’re likely going to see some distressed sales and sellers will need to become more realistic,” said Pulse International Realty founder Rena Kliot. “The spike in home prices is not sustainable and was in direct correlation to the pandemic. During the dark days of the pandemic, there were many desperate and emotional purchases.”

4. Changing residential market tastes. While single-family homes will continue to be popular, the U.S. condo market will return in full swing.

“Life as we knew it seems to be returning and that is drawing people back to urban dwelling – especially with condo living,” Kliot said. “Condo prices are now also more affordable or negotiable than single-family residences.”

5. Strong signals from the stock market. Across the U.S., there seems to be a general sigh of relief the worst has passed.

“Inflation has peaked, interest rates have peaked, and home prices have peaked for now,” said Elegran Real Estate managing director Jared Antin. “The stock market – notably the tech-heavy NASDAQ – has seen a significant rebound thus far in 2023, which instills a certain level of confidence in the consumer.”

The falling market through much of 2022 had the opposite effect, reducing consumer appetite for a new home with rising interest rates and inflation.

“Now, a more positive consumer base will help fuel a rebounding real estate market,” Antin noted.

One of the most important things a would-be home buyer should do right now is to stay hopeful and be prepared.

“Don’t assume that just because you’re having trouble finding a home now, or can’t afford a house at today’s rates, that you’ll never be a homeowner,” LendingTree senior economist Jacob Channel. “If you have patience and are willing to compromise on some things, like how many bathrooms your house needs to have or what specific neighborhood you require, you can make your dream of homeownership a reality.”

Additionally, being prepared financially when a good deal arises is critical right now.

“Be diligent about saving money and make all of your monthly payments on time to protect your credit,” Chanel told TheStreet. “Also, shop around and compare mortgage offers from different lenders or look into different mortgage loan programs – like FHA or USDA backed loans – so you can make the home buying experience more affordable.”

NAR: 3Q Home Prices Up in 98% of Metros

Leave a comment November 14, 2022 LaurelMurphyRE

By Kerry Smith -NOVEMBER 11, 2022

Home prices rose 8.6% in 3Q, with 46% of metros seeing double-digit price growth – a drop from 80% in 2Q. Of the top 10 high-price-increase metros, 7 are in Fla.

WASHINGTON – An overwhelming majority of metro markets saw home price gains in the third quarter of 2022, according to the National Association of Realtors® (NAR). That increase was in spite of rising mortgage rates that approached 7% and declining sales.

Of the 185 metros NAR tracks, 46% had double-digit price increases, though that’s down from 80% in the second quarter.

The national median single-family existing-home price climbed 8.6% year-to-year to $398,500. While still a notable price increase, it’s down from the 14.2% recorded in the previous quarter.

“Much lower buying capacity has slowed home price growth and the trend will continue until mortgage rates stop rising,” says NAR Chief Economist Lawrence Yun. “The median income needed to buy a typical home has risen to $88,300 – that’s almost $40,000 more than it was prior to the start of the pandemic back in 2019.”

Among the major U.S. regions, the South registered the largest share of single-family existing-home sales (44%) and the greatest year-over-year price appreciation (11.9%) in the third quarter. Prices were up 8.2% in the Northeast, 7.4% in the West, and 6.6% in the Midwest.

Fla. has 7 of top 10 metros for price growth

North Port-Sarasota-Bradenton – 23.8%
Lakeland-Winter Haven – 21.2%
Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C. – 21.1%
Panama City – 20.5%
Deltona-Daytona Beach-Ormond Beach – 19.6%
Port St. Lucie – 19.4%
Greenville-Anderson-Mauldin, S.C. – 18.9%
Kingsport-Bristol-Bristol, Tenn.-Va. – 18.8%
Tampa-St. Petersburg-Clearwater – 18.8%
Ocala (18.8%

10 most expensive markets in the U.S.

San Jose-Sunnyvale-Santa Clara, Calif. – $1,688,000; 2.3%
San Francisco-Oakland-Hayward, Calif. – $1,300,000; -3.7%
Anaheim-Santa Ana-Irvine, Calif. – $1,200,000; 9.1%
Urban Honolulu, Hawaii – $1,127,400; 7.6%
San Diego-Carlsbad, Calif. – $900,000; 5.9%
Los Angeles-Long Beach-Glendale, Calif. – $893,200; 3.8%
Boulder, Colo. – $826,900; 7.5%
Naples-Immokalee-Marco Island – $746,600; 16.7%
Seattle-Tacoma-Bellevue, Wash. – $741,300; 4.6%
Boston-Cambridge-Newton, Mass.-N.H. – $698,900; 6.2%

“The more expensive markets on the West Coast will likely experience some price declines following this rapid price appreciation, which is the result of many years of limited home building,” Yun says. “The Midwest, with relatively affordable home prices, will likely continue to see price gains as incomes and rents both rise.”

Higher cost for monthly payments

In the third quarter of 2022, stubbornly high home prices and increasing mortgage rates reduced housing affordability. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,840. That’s a marginal increase from the second quarter ($1,837) but a significant year-to-year jump of $614 – or 50%.

Families typically spent 25% of their income on mortgage payments, down from 25.3% in the prior quarter, but up from 17.2% one year ago.

“A return to a normal spread between the government borrowing rate and the home purchase borrowing rate will bring the 30-year mortgage rates down to around 6%,” Yun says. “The usual spread between the 10-year Treasury yield and the 30-year mortgage rate is between 150 to 200 basis points, rather than the current spread of 300 basis points.”

First-time buyer challenges

First-time buyers looking to purchase a typical home during the third quarter of 2022 continued to feel the impact of housing’s growing unaffordability. For a typical starter home valued at $338,700 with a 10% down payment loan, the monthly mortgage payment rose to $1,808 – nearly identical to the previous quarter ($1,807) but an increase of almost $600 (49%), from one year ago ($1,210).

First-time buyers typically spent 37.8% of their family income on mortgage payments, up from 36.8% in the previous quarter. A mortgage is considered unaffordable if the monthly payment (principal and interest) amounts to more than 25% of the family’s income.

A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 59 markets, up from 53 in the prior quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 17 markets, down from 23 in the previous quarter.

Real Estates Current Market Silver Lining

Leave a comment November 13, 2022 LaurelMurphyRE

For those looking for the good news about today’s real estate market. A bit of a deep dive, about 60 minutes worth but excellently delivered. Three main facts tell us it’s not all doom and gloom. Combine them with the time of year and the general fear that has most buyers/sellers on the sidelines, spells opportunity. (40:00). We can help should you decide to take advantage of today’s market.

Historical trends, what happens after quantitative tightening (12:00)
Demographics, there’s a lot of millennials (24:50)
Inventory levels, yes they are still historically low (22:00)

How Homeownership Can Help Shield You from Inflation

Leave a comment May 5, 2022 LaurelMurphyRE

If you’re following along with the news today, you’ve likely heard about rising inflation. You’re also likely feeling the impact in your day-to-day life as prices go up for gas, groceries, and more. These rising consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.

If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.

Homeownership Offers Stability and Security

Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.

Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. If you get a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says:

“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”

So even if other prices rise, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.

Use Home Price Appreciation to Your Benefit

While it’s true rising mortgage rates and home prices mean buying a house today costs more than it did a year ago, you still have an opportunity to set yourself up for a long-term win. Buying now lets you lock in at today’s rates and prices before both climb higher.

In inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. The graph below shows how home price appreciation outperformed inflation in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):

So, what does that mean for you? Today, experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, any home price appreciation that does occur will be good for your equity and your net worth. And since homes are typically assets that grow in value (even in inflationary times), you have peace of mind that history shows your investment is a strong one.

Bottom Line

If you’re ready to buy a home, it may make sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation and how to time your purchase, let’s connect.

Myths About Today’s Housing Market

Leave a comment April 25, 2022 LaurelMurphyRE

Some Highlights

If you’re planning to buy or sell a home today, it’s important to be aware of common misconceptions.
Whether it’s timing your purchase as a buyer based on home prices and mortgage rates or knowing what to upgrade or repair before listing your house as a seller, it takes a professional to guide you through those decisions.
Let’s connect so you have an expert to help separate fact from fiction in today’s housing market.