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Support Hometown Heroes – Support Amendment 3

Teachers, police and nurses should be able to buy a home in the communities they serve. Amendment 3’s new property tax break can help make that happen.

TALLAHASSEE, Fla. – Constitutional amendments can be confusing, but Amendment 3, which will appear on the November ballot, is straightforward and worthwhile.

Among the three amendments Florida voters will consider in November, one is a tax benefit for Florida’s hometown heroes, which includes teachers, law enforcement officers, emergency medical personnel, active duty members of the military and Florida National Guard, child welfare service employees and others.

Florida Realtors® strongly supports Amendment 3.

“For decades, Florida Realtors and its more than 225,000 members have been vocal advocates for affordable housing,” says Christina Pappas, president of Florida Realtors. “With affordability climbing further out of reach in the state, it’s become extremely challenging for the men and women who serve our communities to live in the areas where they serve. Amendment 3 will help by providing much-needed property tax relief to hometown heroes in our state.”

Amendment 3 would provide hometown heroes an additional $50,000 homestead property exemption on non-school levies if one of the included hometown heroes owns the property.

If passed by voters, the additional tax break would complement the newly created Hometown Heroes Housing Program (HHHP) funded by the Florida Legislature this year, an issue also strongly backed by Florida Realtors. The $100 million in funding under HHHP offers zero-interest loans to help hometown heroes with down payments and closing costs.

According to data compiled by Florida Realtors, the median sale price of a Florida home was just under $374,000 at the end of last year – 21% higher than one year earlier, and 47% higher in just three years. Many targeted hometown hero occupations don’t pay salaries high enough to afford such a home.

“Amendment 3 and the HHHP make a compelling statement to the men and women who serve our state, our communities and our country that we support them,” adds Pappas. “We want to make sure they have a chance of achieving the American dream of homeownership.”

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/support-hometown-heroes-support-amendment-3

Big Drop in Percent of Buyer Bidding Wars

U.S. bidding wars dropped 2.6 percentage points between July and Aug, with Tampa dropping 11 points and Orlando down 12.4. Still, bidding wars rose 2.8 points in Miami.

SEATTLE – Nationwide, 44.6% of home offers written by Redfin agents faced competition in August, the lowest bidding-war rate since the beginning of the pandemic when the housing market nearly ground to a halt, according to a new report from Redfin.

Year-to-year, U.S. bidding wars are down 63.5% a year earlier, and a revised rate of 47.2% in July marks the seventh-straight monthly decline.

The three Florida metros included in the study had mixed results, however. Miami came close to the national average, while two Central Florida cities saw a more dramatic month-to-month drop. Researchers say Tampa had the second-lowest bidding war rate of all cities in the study, with San Antonio and Phoenix also seeing a noteworthy drop.

Share of Florida offers that faced competition

  • Miami: 42.2% (Aug. 2022) – 39.4% (July 2022) – 57.5% (Aug. 2021)
  • Orlando: 30% (Aug. 2022) – 42.4% (July 2022) – 56.7% (Aug. 2021)
  • Tampa: 23.8% (Aug. 2022) – 35.7% (July 2022) – 53.6% (Aug. 2021)

The typical home in a U.S. bidding war received 3.2 offers in August compared with 3.5 offers one month earlier and 5 offers one year earlier, according to the study.

Some buyers are dropping out of the market because mortgage rates have doubled year-to-year, reaching 6.29% in Freddie Mac’s latest weekly study. The increase in rates makes buying a home much more expensive: A buyer purchasing a $400,000 home has a monthly mortgage payment of roughly $2,500 with today’s mortgage rates, up from under $2,000 with last year’s rates.

To be included in this analysis, metros must have had a monthly average of at least 50 offers submitted by Redfin agents from March 2021 to March 2022.

Townhomes likely face competition, condos less so

Offers for townhouses were more likely than other property types to encounter competition, with 44.1% of Redfin offers facing bidding wars. They were followed by single-family homes (42.1%), multi-family properties (40.2%) and condos (37%).

Townhouses are popular in today’s pricey housing market because they’re typically smaller and more affordable than single-family homes.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/big-drop-percent-buyer-bidding-wars

Using SunStats in a Changing Market

Florida Realtors economist: If market changes challenge Realtors, sellers’ heads must be spinning. Use SunStats to help clients understand what’s going on.

ORLANDO, Fla. – The breakneck pace of market changes has even the most seasoned Realtors experiencing whiplash. Just 12 months ago, homes were flying off the market as soon as they listed, often with a very different set of terms (think waived appraisals and inspections and more all-cash offers) than typically seen. Some sellers were unlocking massive equity while buyers were enjoying historically low interest rates that boosted their purchasing power.

Cut to today where market conditions are starting to become vastly different. In a time of great change, how do you know if what you’re seeing in the field reflects on a specific deal or if it points to a broader market trend? This is where a peek into the data available exclusively to Florida Realtors® members becomes invaluable.

Market stats help set the table

Like with most things in life, events need context to be understood. Take the listing you just got and put on the market. Is it sitting a little longer than you would have expected given how things had been going? Are buyers seeming a little choosier and making more “down to earth” offers? Aside from any particularities of the house itself, could this shift be due to a broader market trend? Here’s how to find out.

Three key indicators: Active inventory, median sales price, median time to sale

Data can tell a story, but you need to know what to look for to get the entire picture. Put together, active inventory, median time to sale and median sales price can indicate the overall health and pace of your market.

Simply put, the more there is on the market and the longer it takes to sell, the greater the chance prices will fall.

If the supply of homes for sale is low and has been trending lower for several months, you know that there is less for buyers to choose from. This creates competition among buyers who then start waiving contingencies and placing higher bids to win, which increases the median sale price over time.

In aggregate, the more people start paying over what the seller asks (and even what the house will appraise for), the higher the median sale price will be. When you look at these two metrics side by side, you can see that as inventory goes down, median sale price starts to increase. It’s a simple display of supply and demand – the less there is of something, the more expensive it will be.

However, things may be starting to shift. After bottoming out in February 2022, active inventory has increased each month. While the median sale prices are still high, the pace of growth has started to slow, perhaps an indication that more inventory is lessening the competition among buyers who can put more reasonable deals together.

Economists also look to the increasing interest rates as a contributing factor for declining demand, as the cost of a mortgage has accelerated considerably in the past year, kicking more and more people out of the pool of potential buyers.

Then you have to consider how long deals are taking to go from list to closed. The faster this pace, the “frothier” the market.

Before the pandemic, a typical single-family Florida home took around 90 days to close. This allowed for all the pieces to fall into place – buyers considered all their options, did due diligence, may have had a contingency to sell their home, used traditional financing – all the “normal” practices. That all changed when inventory shrank, demand accelerated and buyers were looking to upgrade, take advantage of low interest rates or finally get out of rentals. The heavy competition changed the rules of engagement as the number of cash deals (which close much faster than financed deals) increased.

This is a metric to keep an eye on, particularly in deals where you’re representing a seller. Putting a home under contract in a week after fielding multiple offers may not materialize anymore.

Price tier matters

Not all markets are equal and not all price points are either. Consider this chart below. The active inventory for homes in the lower price point remains well below where it was two years ago, whereas there has been a sharp increase for the higher price points.

What’s in your market?

No two parts of Florida are the same and neither are their real estate markets. Headlines and general talking points are fine, but you owe it to yourself and your clients to dive into what’s happening locally. Take some time to explore Florida Realtors SunStats. Pull up these three metrics for your market and see what’s happening.

Jennifer Warner is an economist and Florida Realtors Director of Economic Development

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/using-sunstats-changing-market

Promoting an Event on Instagram? Here’s How

A successful promotion takes planning. It should start with a two-week launch strategy that boosts content such as reels, videos, stories, etc.

NEW YORK – When promoting events through Instagram, it’s essential to plan ahead, says Michelle Berman-Mikel, owner of Berman Media PD and creator of the Instagram Power Method Program.

The first step: Create a two-week launch strategy that boosts such content as reels, videos, stories and so on. Agents need to particularly focus on the use of real-life content, relevant sponsors and emails.

This strategy consists of a structured “Launch” day that can be reverse-engineered to determine the days to post content and send emails. An agent should use their own imagery at the location or photos/videos from past events. Animation or “graphics” from resources like Canva should be avoided.

To project credibility, agents should refer to businesses, individuals and organizations. For instance, agents who want to offer a giveaway for a product or promote an event with sponsors should do interviews at the sponsor’s site. Leading up to the date of the event, agents will use this content on their account and collect it from various sources to correspond with posts on the days the emails go out.

When selecting event sponsors, agents should pay attention to those who have a social presence and create a sponsorship agreement to ensure their participation. The agreement could include email database size and Instagram analytics, including engagement rate, reach and impressions, and a reference to the agent’s account name.

Agents should consider paying for ads only after the organic presence is established. It typically takes six days for a campaign to be executed fully on Instagram.

Source: Inman (09/14/22) Berman-Mikel, Michelle

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2022/09/promoting-event-instagram-heres-how

Aug. Home Prices Drop a Bit in S. Fla.

In South Fla., median prices fell a bit in Aug., and many licensees see that as a good thing after months of price increases that were “neither normal nor sustainable.”

MIAMI – Housing prices fell again last month in Miami-Dade County and dipped for the first time in months in neighboring Broward County, an uplifting sign for aspiring home buyers.

Miami-Dade’s median sale price dwindled to $551,250 for a single-family home in August, down from $570,000 the prior month, according to the monthly sales report released Wednesday by the Miami Association of Realtors. Condominium prices also dropped to a $375,000 midpoint from $380,000 in July.

The price decreases in Miami-Dade represent the second consecutive month, after climbing steadily from September through June and reaching historic high marks of $579,000 for a house and $410,000 for a condo.

“Prices never go up forever,” said Ana Bozovic, founder and real estate market analyst at Analytics Miami. “The steady ramp up we have had through mid-2022 was neither normal nor sustainable.”

In August, Broward showed the first signs of a softening residential real estate market. Although condo prices held steady at a $265,000 median, the midpoint sale price for a house fell to $562,500 from $600,000 in July.

The South Florida housing market has overheated during the two-year pandemic due to a tight supply of available homes and an influx of out-of-state buyers who decided to call the area their new home. That pushed demand and prices up since many of these newcomers outbid local residents and paid cash for houses and condos.

The pandemic-induced dramatic shift in the white-collar workplace from office buildings to homes allowing technology, finance, legal professionals and others to work remotely from anywhere during the pandemic has sharply worsened a housing-affordability crisis in South Florida that began well before the coronavirus emerged in March 2020.

Natives and longtime residents in Miami-Dade and Broward have been waiting on the sidelines, betting the runaway housing prices would eventually settle down.

For now, South Florida still has slim pickings for people determined to buy a home. Miami-Dade has an available inventory of 3.3 months of houses and 3.4 months of condos. Broward has supplies of 2.5 months of houses and 2.1 months of condos. This is far from a balanced market, which typically has five to seven months of housing supply to purchase.

Total housing sale transactions did increase from July to August across the region. Miami-Dade reported 2,505 sales, up from 2,375, while Broward recorded 2,700 transactions, higher than the 2,575 in July. Keeping with a longer trend, nearly half of the buyers last month paid for homes in cash – to likely avoid rising interest rates on mortgages, experts say – in both Miami-Dade and Broward.

Florida Atlantic University finance professor Ken H. Johnson, an expert on the real estate market, said interest rates will continue increasing through the remainder of the year.

On Wednesday, the Federal Reserve announced its fifth bump in its benchmark interest rate in 2022, the third increase of three-quarters of 1% – aggressive moves to try to curtail lingering consumer price inflation. The Fed’s rate hikes have pushed 30-year conventional mortgages to an average of 6%, double the mark from a year ago and the highest level since 2008.

Johnson thinks part of the Fed’s inflation-fighting strategy to keep raising interest rates is to limit consumer buying power. One element of the Fed’s thinking, he said, is that as mortgage rates go up fewer people will borrow against the equity in their homes via home equity lines of credit.

“The Fed is aware that we have the availability of credit being driven by the size of equities in our home and the Fed is worried about building bigger lines of credit,” Johnson said. “Many of us worry that this is creating another form of money supply that the Fed doesn’t have control over.”

Meanwhile, Joey Francilus, a North Miami native and digital strategist, has been shopping for a home but is reassessing the timeline due to interest rate jumps and protracted consumer price increases. The 32-year-old wants to buy by late 2023 a three-bedroom, two-bathroom house in North Miami, similar to the home where he grew up. His mother, Marie Severe Jean-Francois, emigrated from Haiti to New York City in 1979 and soon after moved to Miami. She bought her home in 1998 for $88,000. Today, it’s valued at $400,000.

Francilus fears the South Florida newcomers with deep pockets are continuing to force out longtime residents like him.

“We can have growth,” he said, of the housing market. “But if we’re pricing out the very people who make this town what it is, then what’s the cost? We’re losing our essence, if the people who make this town can’t afford to live here.”

George Washington University School of Business Professor Vanessa Perry studies the homeownership gap and thinks that aspiring first-time home buyers like Francilus are hindered more than others by higher mortgage rates.

“That’s a particular constraint we are dealing with now, because house prices are so high and we’re seeing such enormous rates of house price appreciation over the pandemic,” Perry said. “It makes it even more difficult for the first-time home buyer to enter the market, because they need a mortgage to buy a home and qualifying for that mortgage is even more difficult than it was a year ago.”

© 2022 Miami Herald. Distributed by Tribune Content Agency, LLC.

https://www.floridarealtors.org/news-media/news-articles/2022/09/aug-home-prices-drop-bit-s-fla

Some Buyers Slowly Learn to Like Fixer-Uppers

NEW YORK – Eight months ago, Matt Klinger and his wife Nicole had some tough decisions to make. Should the Southern California couple with three small kids under the age of 5 who are outgrowing their condo buy a new house in one of the costliest housing markets in the country? Or should they invest in a home in need of some tender loving care, otherwise known as a “fixer-upper,” a house that’s available to buy at a lower price because it usually requires expensive repairs and sweat equity?

After much thought and discussion, they opted for a 100-year-old, 2,500-square-foot fixer-upper with a few structural beam and termite issues. The house got a kitchen upgrade and needed a new roof.

“You begin asking yourself, ‘How much work are you willing to put into it?’” Klinger said.

Often an opportunity for entry-level buyers to get into homeownership, fixer-upper houses are increasingly popular by homebuyers of all income levels, as higher home prices and interest rates limit purchase power.

The median cost of a fixer-upper home in the U.S. is around $225,000; that’s about 45% cheaper than turnkey homes in cities that are the same size, according to Porch, a home improvement site connecting homeowners and contractors. By comparison, the median price of an existing home is around $403,800, according to the National Association of Realtors.

“The market is both competitive and challenging right now,” said Mike Hardy, managing partner for Churchill Mortgage in Los Angeles. He owns several fixer-uppers under repair in Southern California and advised Klinger on investing in an older house.

“You have to look at your budget closely and decide what’s in your best interest – to buy now or later, new or old?” Hardy said. “It’s a process not to be taken lightly.”

Are fixer-upper houses cheaper?

Klinger paid $1 million for his Craftsman-style home, considered a bargain in California, the most expensive home market in the nation. His fixer-upper purchase is on par with other California cities including San Jose ($1.3 million), San Francisco ($1 million), and Los Angeles ($900,000), according to StorageCafe, a storage marketplace.

The expanded kitchen with plenty of natural wood cabinetry and open dining area of the Klinger’s two-story home allows their children, Cooper, Chloe and Clara, to run around freely. The space becomes not only a place to cook with room for a large dining room table, a couple of nooks with small bar chairs to complement that wide play space for the kids.

So far, the Klingers invested about $200,000, a chunk of which went to expand the kitchen. Matt even helped tear down the wall with a sledgehammer that opens up the kitchen to the dining room. Nicole did her fair share as well by helping put together a bench and laying down some of the new flooring.

‘Do what I had to do’

When Stephanie Zolomij bought her fixer-upper two-story townhouse in suburban Philadelphia in July 2021, she couldn’t move in until four months later. Why? On the day the single mom of 5-year-old twin boys was supposed to close on her home, the “dark and dingy” basement got flooded. She said the water heater “rotted out.”

Undeterred, she agreed to replace the heater and rip up the basement’s damp old Berber carpet and got a credit back on her purchase.

Then there was the roof so decayed that her homeowner’s insurance wouldn’t even help cover it.

“So, I got a new roof,” said Zolomij, who works in forensic psychology to help get mentally ill violent offenders competent to stand trial. “This house met my expectations, but I knew I would have to pay a little something to get it into shape.” So far, she’s spent about $50,000 to get the 1,600-square-foot townhome to where she wants it and pay for unexpected repairs.

But, due to supply chain issues, there was still a two-month backlog to do that, even after Zolomij paid extra to rush orders.

“That was a drag,” she said.

Then the pipes broke on a new kitchen sink a contractor installed and began “leaking everywhere.” And, when a replacement valve for the main water line broke, Zolomij’s basement flooded – again.

“Twice in two months,” she said, with a wry laugh. “ (Expletive) unbelievable!”

Undaunted, Zolomij replaced all the lights and ceiling tiles, and got “beautiful fluffy, clean carpet throughout.” Zolomij then refurbished the bathrooms, complete with new toilets and fixtures.

“I’m compulsive and a very hands-on person,” she said. “I replaced every light switch, face plate, you name it. I had to do what I had to do.”

That “can-do persona” epitomizes Zolomij, said Kristina O’Donnell, a Philadelphia-area Realtor who helped Zolomij find and even redo her fixer-upper after nearly three years of searching for a more spacious and affordable home.

“She didn’t give up. She knew what she wanted and is willing to do whatever it takes,” said O’Donnell about Zolomij.

Zolomij still wants to touch up the kitchen, and redo her outdoor deck as well as one of the bathrooms, in case her mother wants to move in someday.

Additionally, Zolomij said her townhouse’s heating, ventilation, and air conditioning system “haunts me” because it’s 30 years old. It works fine – for now.

“But when it goes, that’s going to be another big chunk of money,” she said.

Zolomij said she and her sons, Abel and Spencer, who just started kindergarten, are in her fixer-upper for the long haul.

“I don’t ever want to pick up and move,” Zolomij said.

Copyright 2022, USATODAY.com, USA TODAY

https://www.floridarealtors.org/news-media/news-articles/2022/09/some-buyers-slowly-learn-fixer-uppers

NAR Will Plant One Tree for Every Realtor

A tree will soon symbolize your Realtor membership. In partnership with the National Forest Foundation, NAR will plant more than 1.5M trees by 2025.

CHICAGO – The National Association of Realtors® (NAR) announced a partnership with the National Forest Foundation (NFF) that will result in 1.575 million trees being planted across the United States.

According to NAR, it will plant at least one tree for each Realtor® by the end of 2025. NAR 2022 President Leslie Rouda Smith spearheaded the climate-friendly initiative.

“As part of our association’s comprehensive sustainability and resilience plan, NAR is leading by example, like we always do,” says Rouda Smith. “We’re helping to foster more vibrant communities by increasing the number of trees around us, delivering cleaner air, enhancing stormwater mitigation and encouraging biodiversity in ecosystems.

Planting 1.575 million trees reduces 750,000 metric tons of carbon in the atmosphere, equivalent to 145,931 homes’ electricity use for one year or the annual operation of over 160,000 gas-powered passenger vehicles, according to the U.S. Environmental Protection Agency (EPA).

NAR doesn’t know yet where all the trees will go, however. It says the locations will be based on repopulation needs in areas affected by events like wildfires, drought or deforestation. NFF only plants native, ecologically appropriate trees and targets support to areas that need the most help.

“We are excited to partner with NAR to expand our tree planting efforts,” says Mary Mitsos, President and CEO at the NFF. “The future of our national forests depends on partnerships like this one to sustain natural ecosystems, foster resilient forests and promote healthy communities. Each contributing dollar means one more tree planted to help to mitigate wildfires, offset carbon footprint, combat climate change and maintain 193 million acres of National Forests.”

Under the NAR-NFF agreement, NFF will plant 1,575,000 trees in National Forest locations nationwide based on NAR’s guaranteed donation of $1.575 million.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/nar-will-plant-one-tree-every-realtor

Long-Term Mortgage Rates Climb to 6.29%

The average 30-year, fixed-rate mortgage didn’t spend much time hovering around the 6% mark. It rose 0.27 percentage points this week, up from last week’s 6.02%.

WASHINGTON (AP) – Average long-term U.S. mortgage rates jumped by more than a quarter-point this week to their highest level since 2007 as the Federal Reserve intensified its effort to tamp down decades-high inflation and cool the economy.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate climbed to 6.29%, from 6.02% last week. That’s the highest it’s been since August of 2007, a year before a crash in the housing market triggered the Great Recession.

Rapidly rising mortgage rates threaten to sideline even more homebuyers after more than doubling in 2022. Last year, prospective homebuyers were looking at rates well below 3%.

On Wednesday, the Federal Reserve bumped its benchmark borrowing rate by another three-quarters of a point in an effort to constrain the economy, its fifth increase this year and third consecutive 0.75 percentage point increase.

Perhaps nowhere else is the effect of the Fed’s action more apparent than the housing sector. Existing home sales have been in decline for seven straight months as the rising cost to borrow money puts homes out of reach for more people.

The National Association of Realtors said Wednesday that existing home sales fell 0.4% last month from July to a seasonally adjusted annual rate of 4.80 million. Sales fell 19.9% from August last year, and are now at the slowest annual pace since May 2020, early in the pandemic.

The national median home price jumped 7.7% in August from a year earlier to $389,500. As the housing market has cooled, home prices have been rising at a more moderate pace after surging annually by around 20% earlier this year. Before the pandemic, the median home price was rising about 5% a year.

In the four weeks ended Sept. 11, home listings fell 19% from a year earlier, the largest drop since May 2020, the real estate brokerage Redfin found.

Many potential homebuyers are opting out of the market as the higher rates add hundreds of dollars to monthly mortgage payments. On the other end, many homeowners are reluctant to sell as they are likely locked into a much lower rate than they’d get on their next mortgage.

The Fed’s move Wednesday boosted its benchmark short-term rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level since early 2008. Fed officials forecast that they will further raise their benchmark rate to roughly 4.4% by year’s end, a full point higher than they envisioned as recently as June. And they expect to raise the rate again next year, to about 4.6%. That would be the highest level since 2007.

By raising borrowing rates, the Fed makes it costlier to take out a mortgage and an auto or business loan. Consumers and businesses then presumably borrow and spend less, cooling the economy and slowing inflation.

Mortgage rates don’t necessarily mirror the Fed’s rate increases but tend to track the yield on the 10-year Treasury note. That’s influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.

Recently, faster inflation and strong U.S. economic growth have sent the 10-year Treasury rate up sharply, to 3.65%.

The average rate on 15-year, fixed-rate mortgages, popular among those looking to refinance their homes, jumped to 5.44% from 5.21% last week. That’s the highest level since 2008. Last year at this time the rate on a 15-year mortgage was 2.15%.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

https://www.floridarealtors.org/news-media/news-articles/2022/09/long-term-mortgage-rates-climb-629

Fed Message: Inflation Fight May Cause Recession

WASHINGTON (AP) – The Federal Reserve delivered its bluntest reckoning Wednesday of what it will take to finally tame painfully high inflation: Slower growth, higher unemployment and potentially a recession.

Speaking at a news conference, Chair Jerome Powell acknowledged what many economists have been saying for months: That the Fed’s goal of engineering a “soft landing” – in which it would manage to slow growth enough to curb inflation but not so much as to cause a recession – looks increasingly unlikely.

“The chances of a soft landing,” Powell said, “are likely to diminish” as the Fed steadily raises borrowing costs to slow the worst streak of inflation in four decades. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be.”

Before the Fed’s policymakers would consider halting their rate hikes, he said, they would have to see continued slow growth, a “modest” increase in unemployment and “clear evidence” that inflation is moving back down to their 2% target.

“We have got to get inflation behind us,” Powell said. “I wish there were a painless way to do that. There isn’t.”

Powell’s remarks followed another substantial three-quarters of a point rate hike – its third straight – by the Fed’s policymaking committee. Its latest action brought the Fed’s key short-term rate, which affects many consumer and business loans, to 3% to 3.25%. That’s its highest level since early 2008.

Falling gas prices have slightly lowered headline inflation, which was a still-painful 8.3% in August compared with a year earlier. Those declining prices at the gas pump might have contributed to a recent rise in President Joe Biden’s public approval ratings, which Democrats hope will boost their prospects in the November midterm elections.

On Wednesday, the Fed officials also forecast more jumbo-size hikes to come, raising their benchmark rate to roughly 4.4% by year’s end – a full point higher than they had envisioned as recently as June. And they expect to raise the rate again next year, to about 4.6%. That would be the highest level since 2007.

By raising borrowing rates, the Fed makes it costlier to take out a mortgage or an auto or business loan. Consumers and businesses then presumably borrow and spend less, cooling the economy and slowing inflation.

Other major central banks are taking aggressive steps, too, to combat global inflation, which has been fueled by the global economy’s recovery from the COVID-19 pandemic and then Russia’s war against Ukraine. On Thursday, Britain’s central bank raised its key interest rate by a half-percentage point – to its highest level in 14 years. It was the Bank of England’s seventh straight move to increase borrowing costs at a time of rising food and energy prices, which have fueled a severe cost-of-living crisis..

This month, Sweden’s central bank raised its key interest rate by a full point. And the European Central Bank delivered its largest-ever rate increase with a three-quarter-point hike for the 19 countries that use the euro currency.

In their quarterly economic forecasts Wednesday, the Fed’s policymakers also projected that economic growth will stay weak for the next few years, with unemployment rising to 4.4% by the end of 2023, up from its current level of 3.7%. Historically, economists say, any time unemployment has risen by a half-point over several months, a recession has always followed.

“So the (Fed’s) forecast is an implicit admission that a recession is likely, unless something extraordinary happens,” said Roberto Perli, an economist at Piper Sandler, an investment bank.

Fed officials now foresee the economy expanding just 0.2% this year, sharply lower than their forecast of 1.7% growth just three months ago. And they envision sluggish growth below 2% from 2023 through 2025. Even with the steep rate hikes the Fed foresees, it still expects core inflation – which excludes volatile food and gas costs – to be 3.1% at the end of 2023, well above its 2% target.

Powell warned in a speech last month that the Fed’s moves will “bring some pain” to households and businesses. And he added that the central bank’s commitment to bringing inflation back down to its 2% target was “unconditional.”

Short-term rates at a level the Fed is now envisioning will force many Americans to pay much higher interest payments on a variety of loans than in the recent past. Last week, the average fixed mortgage rate topped 6%, its highest point in 14 years, which helps explain why home sales have tumbled. Credit card rates have reached their highest level since 1996, according to Bankrate.com.

Inflation now appears increasingly fueled by higher wages and by consumers’ steady desire to spend and less by the supply shortages that had bedeviled the economy during the pandemic recession. On Sunday, Biden said on CBS’ “60 Minutes” that he believed a soft landing for the economy was still possible, suggesting that his administration’s recent energy and health care legislation would lower prices for pharmaceuticals and health care.

The law may help lower prescription drug prices, but outside analyses suggest it will do little to immediately bring down overall inflation. Last month, the nonpartisan Congressional Budget Office judged it would have a “negligible” effect on prices through 2023. The University of Pennsylvania’s Penn Wharton Budget Model went even further to say “the impact on inflation is statistically indistinguishable from zero” over the next decade.

Even so, some economists are beginning to express concern that the Fed’s rapid rate hikes – the fastest since the early 1980s – will cause more economic damage than necessary to tame inflation. Mike Konczal, an economist at the Roosevelt Institute, noted that the economy is already slowing and that wage increases – a key driver of inflation – are levelling off and by some measures even declining a bit.

Surveys also show that Americans are expecting inflation to ease significantly over the next five years. That is an important trend because inflation expectations can become self-fulfilling: If people expect inflation to ease, some will feel less pressure to accelerate their purchases. Less spending would then help moderate price increases.

The Fed’s rapid rate hikes mirror steps that other major central banks are taking, contributing to concerns about a potential global recession. The European Central Bank last week raised its benchmark rate by three-quarters of a percentage point. The Bank of England, the Reserve Bank of Australia and the Bank of Canada have all carried out hefty rate increases in recent weeks.

And in China, the world’s second-largest economy, growth is already suffering from the government’s repeated COVID lockdowns. If recession sweeps through most large economies, that could derail the U.S. economy, too.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. AP Economics Writer Paul Wiseman contributed to this report.

https://www.floridarealtors.org/news-media/news-articles/2022/09/fed-message-inflation-fight-may-cause-recession

Top RE Industry Players Discuss Affordable Housing

NAR and other real estate groups met at the White House Wed. for a “candid discussion” on construction, zoning reforms, financing expansion and tax incentives.

WASHINGTON – National Association of Realtors® (NAR) President Leslie Rouda Smith participated in a White House meeting with a diverse group of housing industry leaders Wednesday.

The group met to explore viable solutions to the nation’s housing supply and affordability crisis. The discussion covered legislative, administrative, private sector, and state and local actions to address housing supply and affordability challenges across the country.

National Economic Council Director Brian Deese, Domestic Policy Council Director Ambassador Susan Rice, Housing and Urban Development Secretary Marcia Fudge and Federal Housing Finance Agency Director Sandra Thompson represented the Biden Administration in discussions.

“This was a candid discussion of ideas about how to fill the historic 5.5 million housing unit gap in the United States,” says Rouda Smith. “Housing supply is the number one issue for millions of consumers … locked out of the market. I conveyed to the Administration and my colleagues our support for a comprehensive plan that includes investment in new construction, zoning reforms, expansion of financing, and tax incentives to spur investment in housing and convert unused commercial space to residential.”

The White House invited leaders from a diverse group of housing industry organizations, including the Mortgage Bankers Association, National Association of Home Builders, National Housing Conference, National Multi-Housing Council, National Low Income Housing Coalition, National Fair Housing Alliance, Bipartisan Policy Center and Affordable Housing Tax Credit Coalition.

“Discussions like this are critical to raising awareness about housing affordability,” adds Rouda Smith. “Middle-income, first-time and first-generation homebuyers feel the most impact of this supply shortage as they face greater obstacles in the current economic climate. We look forward to continuing discussions with the Administration, policymakers and our industry partners to advance viable reforms that have a lasting impact on the housing market.”

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/top-re-industry-players-discuss-affordable-housing

iBuyer Opendoor Reports Losses as Markets Shift

When home prices were rising, the iBuyer made “easy profits,” but some think its losses now – 42% of its Aug. sales – mirror Zillow’s failed iBuying venture.

NEW YORK – Home-flipper and iBuyer Opendoor Technologies lost money on 42% of its transactions in August, with especially hard losses in key markets like Los Angeles and Phoenix, according to YipitData reports.

Opendoor has already warned investors that it expected to lose up to $175 million in adjusted earnings before interest, taxes, depreciation and amortization in the third quarter.

Opendoor’s losses closely mirror the pricing problems that ended Zillow Offers, Zillow Group’s iBuying business, last year, according to Mike DelPrete at the University of Colorado Boulder.

Although this attrition may not doom the company, DelPrete speculates that September’s numbers may be even worse.

Opendoor racked up easy profits when home prices were soaring earlier in the year, before diminished affordability and high mortgage rates shut out would-be buyers. By June, median home prices had started falling in some areas, especially in Sun Belt markets. This forced Opendoor to offload thousands of properties it had agreed to buy when prices were increasing. The company elected to honor the offers, telling investors in August that the decision was an investment in the company’s brand.

Opendoor will eventually finish selling through the inventory acquired before the market changed, giving it an opportunity to stem its losses and resume profitable home sales.

Source: Bloomberg (09/19/22) Clark, Patrick; Kane, Elizabeth

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2022/09/ibuyer-opendoor-reports-losses-markets-shift

Roller Coaster Ride for Fla. ‘Insurer of Last Resort’

Fla. wants to minimize the number of policies in state-operated Citizens Property Ins., but the number has skyrocketed and plunged over its two-decade existence.

TALLAHASSEE, Fla. – Barry Gilway, president and CEO of Citizens Property Insurance Corp., said Wednesday the state-backed insurer has been a “roller coaster ride” for the past two decades.

Right now, it is continuing to pick up speed.

Citizens last week reached 1.055 million policies – more than double the number two years ago – as private insurers drop customers to try to curb financial losses. Meanwhile, the industry continues to grapple with underlying problems, including costs of critical reinsurance and large amounts of claims-related litigation.

Gilway briefed the Citizens Board of Governors during a meeting Wednesday and said private property insurers are projected to have $1 billion in losses this year. Five insurers have been declared insolvent and placed into receivership since February, with tens of thousands of customers of those companies turning to Citizens for coverage.

“If the (financial) numbers remain in the red, and companies aren’t put in a position where they are making a reasonable rate of return, you’re not going to have a stable market,” Gilway said.

A key issue for the market is reinsurance, which provides backup coverage for carriers. It is particularly important in Florida, which depends heavily on Florida-based insurers rather than larger national companies.

Gilway said 40% to 50% of policyholders’ premiums typically go to reinsurance costs, and Florida carriers are expected to continue facing a tight reinsurance market.

A commentary released last week by the AM Best ratings agency pointed to reinsurers seeing losses in Florida, “despite moderate hurricane seasons, further suggesting that current prices are not adequate to cover the claims inflation and fraud in the market. Consequently, reinsurers have been pulling back from the Florida property market or significantly raising prices.”

“Pricing will continue to impact business plans and companies’ ability to use reinsurance structures with adequate limits to protect against severe storms,” the ratings agency said. “AM Best expects reinsurers to remain selective in the risks they reinsure, placing further burdens on the Florida homeowners market, which has seen four property insurers, along with a Louisiana-based insurer that wrote policies in Florida, declared insolvent since late February.”

Florida lawmakers during a May special session approved spending $2 billion in tax dollars to provide another “layer” of reinsurance to insurers that otherwise might not be able to buy it in the private market. But that was a stopgap move to help insurers, many of which needed to have reinsurance contracts in place in June.

Lawmakers also took steps to try to curb litigation costs, but Gilway and many other industry officials argue that more needs to be done to address lawsuits and attorney fees. The issue, however, is always controversial, as groups such as plaintiffs’ attorneys contend that lawsuits help hold insurers accountable for properly paying claims.

“For the third year in a row, the private industry really is going to show a $1 billion loss, with no storms to speak of,” Gilway said. “This is driven by litigation.”

Citizens was created as an insurer of last resort and has seen wild swings in its numbers of policies during the past two decades. After Florida was hammered by a barrage of hurricanes in 2004 and 2005, Citizens’ policy count topped 1 million and remained above that mark until early 2014, according to data on the insurer’s website. But the policy count dropped below 500,000 in 2016 and remained under that level for more than four years.

In September 2020, Citizens hit 511,055 policies and steadily increased to 1,055,366 policies as of Friday, with thousands of customers a week flowing in. Gilway said Citizens insures about 13% of the market and is expected to be at 15% by the end of the year.

In certain areas of the state, however, it is a far-bigger player. For example, it has 39% of the residential market share in Miami-Dade County and 30% in Broward County, Gilway said.

State leaders have long sought to hold down the number of policies in Citizens, in part because policyholders throughout the state could face additional costs – known as “assessments” – if Citizens runs deficits after a major hurricane or multiple hurricanes. Citizens policyholders would be hit hardest by assessments, but other insurance policyholders could also face additional costs if deficits are large enough.

“The entire state’s on the hook,” Citizens board member M. Scott Thomas said during Wednesday’s meeting.

© 2022 The News Service of Florida. All rights reserved. News Service Assignment Manager Tom Urban contributed to this report.

https://www.floridarealtors.org/news-media/news-articles/2022/09/roller-coaster-ride-fla-insurer-last-resort

Fla.’s Aug. Housing: Inventory, Median Prices Rise

Florida Realtors: Fla.’s single-family median price up 15% ($407K), condo median up 20.8% ($305K). Chief Economist: Inventory is growing but pace has slowed.

ORLANDO, Fla. – Florida’s housing market reported increased inventory (active listings) and higher median prices in August 2022 compared to a year ago, according to Florida Realtors®’ latest housing data. Rising mortgage interest rates, inflation and other economic factors continue to impact sales, however.

There are more properties on the market across Florida, according to the latest statistics from Florida Realtors. However, the rate of inventory growth has slowed considerably.

“We are seeing signs that Florida’s housing market is changing, as for-sale inventory continued to increase in August,” says 2022 Florida Realtors President Christina Pappas, vice president of the Keyes Family of Companies in Miami. “The much-needed gains in active inventory will hopefully ease the pressure of rising home prices for buyers. Statewide, homes are continuing to go under contract quickly: The median time to contract statewide for single-family existing homes in August was 16 days compared to nine days during the same month a year ago. The median time to contract for existing condo-townhouse units was 17 days compared to 15 in August 2021.

“Buying or selling a home is a big decision. Consumers can turn to a Realtor for help in understanding local market conditions.”

Last month, closed sales of single-family homes statewide totaled 24,877, down 15.8% year-over-year, while existing condo-townhouse sales totaled 10,000, down 20.3% over August 2021, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

While inventory is growing, Florida Realtors Chief Economist Dr. Brad O’Connor pointed out that the rate of that growth “has slowed considerably.”

He said, “At the end of August, there were nearly 64,000 single-family homes actively listed for sale in Florida’s multiple listing services (MLSs), which is 70.4% more than were listed a year ago and 137% more than were listed six months ago at the end of February. But the number of active listings now is still close to 26% lower than at this time three years ago, prior to the pandemic. What’s more, the rate of growth in single-family inventory has slowed considerably in August, rising only 4% compared to the prior month. By contrast, on a month-over-month basis, inventory had risen by 33% in June and 17% in July.”

One of the reasons for the pull-back in inventory growth is fewer new listings, he explained.

“In August, new listings of single-family homes were down by 3% compared to a year ago, whereas they had been up by more than 3% in July,” O’Connor said. “New listings of condo-townhouse units were down 10.6% in August. This trend is expected to continue for the time being as some homeowners are averse to listing in this uncertain economic environment.”

The statewide median sales price for single-family existing homes last month was $407,000, up 15% from the previous year. Last month’s statewide median price for condo-townhouse units was $305,000, up 20.8% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

On the supply side of the market, the trend of more inventory (active listings) continued, rising year-over-year in August. The supply of single-family existing homes increased to a 2.4-months’ supply while existing condo-townhouse properties are at a 2.2-months’ supply.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 5.22% in August 2022, significantly higher than the 2.84% average during the same month a year earlier.

To see or download the August data report PDFs go to Market Data.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/flas-aug-housing-inventory-median-prices-rise

Fed Raises Interest Rates 3/4 Point for Third Time

NEW YORK (AP) – Mortgage rates have jumped, home sales have slumped and credit cards and auto loans have gotten pricier. Savings rates are slightly juicier, though.

As the Federal Reserve has rapidly increased interest rates, many economists say they fear that a recession is inevitable in the coming months – and with it, job losses that could cause hardship for households already hurt worst by inflation.

Wednesday, the Federal Reserve sharply raised its key short-term rate by three-quarters of a point for a third straight time, even as its previous rate increases are being felt by households at all income levels.

The Fed’s latest move has raised its benchmark rate to a range of 3% to 3.25%, the highest level in 14 years. Its steady rate increases have already made it increasingly costly for consumers and businesses to borrow – for homes, autos and other purchases. And more hikes are almost surely coming.

Here’s what to know:

How does raising interest rates reduce inflation?

If one definition of inflation is “ too much money chasing too few goods,” then by making it more expensive to borrow money, the Fed hopes to reduce the amount of money in circulation, eventually lowering prices.

Which consumers are most affected?

Anyone borrowing money to make a large purchase, such as a home, car, or large appliance, will take a hit, said Scott Hoyt, an analyst with Moody’s Analytics.

“The new rate pretty dramatically increases your monthly payments and your cost,” he said. “It also affects consumers who have a lot of credit card debt – that will hit right away.”

That said, Hoyt noted that household debt payments, as a proportion of income, remain relatively low, though they have risen lately. So even as borrowing rates steadily rise, many households might not feel a much heavier debt burden immediately.

“I’m not sure interest rates are top of mind for most consumers right now,” Hoyt said. “They seem more worried about groceries and what’s going on at the gas pump. Rates can be something tricky for consumers to wrap their minds around.”

How will this affect credit card rates?

Even before the Fed’s decision Wednesday, credit card borrowing rates have reached their highest level since 1996, according to Bankrate.com, and these will likely continue to rise.

And with inflation raging, there are signs that Americans are increasingly relying on credit cards to help maintain their spending. Total credit card balances have topped $900 billion, according to the Federal Reserve, a record high, though that amount isn’t adjusted for inflation.

John Leer, chief economist at Morning Consult, a survey research firm, said its polling suggests that more Americans aren’t spending down the savings they accumulated during the pandemic and are using credit instead. Eventually, rising rates could make it harder for those households to pay off their debts.

Those who don’t qualify for low-rate credit cards because of weak credit scores are already paying significantly higher interest on their balances, and they’ll continue to.

As rates have risen, zero percent loans marketed as “Buy Now, Pay Later” have also become popular with consumers. Yet longer-term loans of more than four payments that these companies offer are subject to the same increased borrowing rates as credit cards.

For people who have home equity lines of credit or other variable-interest debt, rates will increase by roughly the same amount as the Fed hike, usually within one or two billing cycles. That’s because those rates are based in part on banks’ prime rate, which follows the Fed’s.

What if I want to buy a car?

Auto loans are at their highest levels since 2012, according to Bankrate.com’s Greg McBride. Rates on new auto loans are likely to go up by nearly as much as the Fed’s rate increase. That could knock some lower-income buyers out of the new-vehicle market, said Jessica Caldwell, executive director at Edmunds.com.

Caldwell added that the entire increase isn’t passed on to consumers; some automakers are subsidizing rates to attract buyers. Bankrate.com says a 60-month new vehicle loan averaged just over 5% last week, up from 3.86% in January. A 48-month used vehicle loan was 5.6%, up from 4.4% in January.

Many lower-income buyers have already been priced out of the new-vehicle market, according to Caldwell. Automakers have been able to get top dollar for their vehicles because demand is high and supply is low. For more than a year, the industry has been grappling with a shortage of computer chips that has slowed factories worldwide.

How are savers affected?

The rising returns on high-yield savings accounts and certificates of deposit (CDs) have put them at levels not seen since 2009, which means households may want to boost savings wherever possible. You can also now earn more on bonds and other fixed-income investments.

Though savings, CDs, and money market accounts don’t typically track the Fed’s changes, online banks and others that offer high-yield savings accounts can be exceptions. These institutions typically compete aggressively for depositors. (The catch: They sometimes require significantly high deposits.)

In general, banks tend to capitalize on a higher-rate environment to boost their profits by imposing higher rates on borrowers, without necessarily offering juicer rates to savers.

Will this affect rents? Homeownership?

Last week, the average fixed mortgage rate topped 6%, its highest point in 14 years, meaning that rates on home loans are about twice as expensive as they were a year ago.

Mortgage rates don’t always move perfectly in tandem with the Fed increase, instead tracking the expected yield on the 10-year Treasury note. The yield on the 10-year Treasury note has reached nearly 3.6%, its highest level since 2011.

Asking rents are up 11% from last year, said Daryl Fairweather, an economist with the brokerage Redfin. But price growth has slowed, and some renters are moving to more affordable areas.

Will it be easier to find a house if I’m still looking to buy?

If you’re financially able to proceed with a home purchase, you’re likely to have more options than at any time in the past year. Sales of both new and existing homes have dropped steadily for months.

How have the rate hikes influenced crypto?

Cryptocurrencies like bitcoin have dropped in value since the Fed began raising rates. So have many previously high-valued technology stocks. Bitcoin has plunged from a peak of about $68,000 to under $20,000.

Higher rates mean that safe assets like Treasuries have become more attractive to investors because their yields have increased. That makes risky assets like technology stocks and cryptocurrencies less attractive, in turn.

Still, bitcoin continues to suffer from problems separate from economic policy. Two major crypto firms have failed, shaking the confidence of crypto investors.

What’s prompting the rate increases?

The short answer: Inflation. Over the past year, inflation has clocked in at a painful 8.3%. So-called core prices, which exclude food and energy, also rose faster than expected.

Fed Chair Jerome Powell warned last month that, “our responsibility to deliver price stability is unconditional” – a remark widely interpreted to mean the Fed will fight inflation with rate increases even if it leads to deep job losses or a recession. The goal is to slow consumer spending, thereby reducing demand for homes, cars and other goods and services, eventually cooling the economy and lowering prices.

Powell acknowledged that aggressively raising interest rates would “bring some pain.”

What about my job?

Some economists argue that widespread layoffs will be necessary to slow rising prices. One argument is that a tight labor market is fueling wage growth and higher inflation. In August, the economy gained 315,000 jobs. There are roughly two job openings advertised for every unemployed worker.

“Job openings continue to exceed job hires, indicating employers are still struggling to fill vacancies,” noted Odeta Kushi, an economist with First American.

As a result, some argue higher unemployment might cool wage pressures and tame inflation. Research published earlier this month by the Brookings Institution stated that unemployment might have to go as high as 7.5% to reduce inflation to the Fed’s 2% target.

Will this affect student loans?

Borrowers who take out new private student loans should prepare to pay more as rates increase. The current range for federal loans is between about 5% and 7.5%.

That said, payments on federal student loans are suspended with zero interest until Dec. 31 as part of an emergency measure put in place early in the pandemic. President Joe Biden has also announced some loan forgiveness, of up to $10,000 for most borrowers, and up to $20,000 for Pell Grant recipients.

Is there a chance the rate hikes will be reversed?

Stock prices rose in August based on hopes that the Fed would reverse course. But it looks increasingly unlikely that rates will come down anytime soon. Economists expect Fed officials to forecast that the key rate could reach 4% by the end of this year. They’re also likely to signal additional increases in 2023, even to 4.5%.

Will there be a recession?

Short-term rates at these levels will make a recession likelier by increasing the cost of mortgages, car loans, and business loans. While the Fed hopes that higher borrowing costs will slow growth by cooling the hot job market and capping wage growth, the risk is that the Fed could weaken the economy, causing a recession that would produce significant job losses.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. AP Business Writers Christopher Rugaber in Washington, Tom Krisher in Detroit and Damian Troise and Ken Sweet in New York contributed to this report.

https://www.floridarealtors.org/news-media/news-articles/2022/09/fed-raises-interest-rates-34-point-third-time

Aug. U.S. Rent Increases Outpace Fla. Increases

At 10.7%, Orlando came closest to the national year-to-year rise of 11%. It was 10.3% in S. Fla. counties – and median rents actually fell 1.8% in Jacksonville.

SEATTLE – U.S. asking rents climbed to a record high in August, but the rate of rent growth moderated for the third-straight month.

National median asking rent was up 11% year-over-year to $2,039, according to a new report from Redfin – the smallest annual increase in a year, down from a peak gain of 19% in March. On a month-over-month basis, median asking rent climbed 0.4%, the slowest growth since December 2021 and down from 1.6% a year earlier.

In Florida, however, rent growth lagged the U.S. rate. In one city, Jacksonville, Redfin says rents actually declined year-to-year, dropping 1.8%.

Florida metros year-over-year change in rent

  1. Orlando: Up 10.7% (Median rent of $2,153)
  2. Miami: Up 10.3% ($3,027)
  3. Fort Lauderdale: Up 10.3% ($3,027)
  4. West Palm Beach: Up 10.3% ($3,027)
  5. Tampa: Up 5.3% ($2,186)
  6. Jacksonville: Down 1.8% ($1,652)

“Rent growth will likely slow further as the Federal Reserve continues to raise interest rates,” says Redfin Deputy Chief Economist Taylor Marr. “Higher interest rates impact the rental market because they put a damper on spending power in the economy as a whole, including renters’ budgets.”

A boost in rental supply will also likely slow the pace of rent increases. “There are nearly a million rental units under construction that will hit the market in the coming months and years,” says Marr.

Top 10 metro areas for fastest-rising rents

  1. Cincinnati, Ohio: 26%
  2. Pittsburgh: 22%
  3. Indianapolis, Indiana: 21%
  4. Nashville, Tennessee: 20%
  5. Portland, Oregon: 19%
  6. New York City: 18%
  7. Newark, New Jersey: 18%
  8. Nassau County, New York: 18%
  9. New Brunswick, New Jersey: 18%
  10. San Antonio, Texas: 17%

Four of the 50 most populous metro areas saw rents fall in August year-to-year, including Jacksonville:

  • Milwaukee, Wisconsin: -15%
  • Minneapolis, Minnesota: -7%
  • Jacksonville: -1.8%
  • Baltimore -1.2%

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/aug-us-rent-increases-outpace-fla-increases

Need Help or Worried About Someone? Dial 988

On July 16, the National Suicide Prevention Lifeline switched from a full phone number to just 3 digits: 988. After the number upgrade, call volume rose 45%.

WASHINGTON – The rollout of 988 as the new National Suicide Prevention Lifeline may have saved 150,000 more lives in one month than it would have before the transition, according to data released last week.

The initiative has been in the works for years, but the Substance Abuse and Mental Health Services Administration finally launched the new number on July 16, replacing the old 10-digit number, 1-800-273-8255.

In a statement last week, the Department of Health and Human Services released data showing a 45% increase in overall volume last month compared with August 2021, representing 152,000 more contacts that include calls, chats and texts.

The agency also reported a significant reduction in response times, plunging from 2.5 minutes to 42 seconds.

“Our nation’s transition to 988 moves us closer to better serving the crisis care needs of people across America,” said HHS Secretary Xavier Becerra, “988 is more than a number, it’s a message: We’re there for you.”

Suicide is one of the country’s leading causes of death for people aged 10 to 34 years old, according to SAMHSA, with the country reporting one death every 11 minutes in 2020.

Although they’re glad to see progress, health experts say there’s still more that needs to be done in order to catch up with the nation’s growing mental health crisis exacerbated by the COVID-19 pandemic.

“Annually, the mental health in the U.S. has been declining, (and) what COVID has done is send that into a tail-spin,” said Dr. Rheeda Walker, an expert on mental health and suicide prevention, and a psychology professor at the University of Houston. “Having an opportunity to be able to speak to someone who is going to be non-judgmental … it’s immeasurable in how important that is.”

As 988 becomes a recognized number like 911, health experts warn sustaining higher call volumes and reduced wait times will require more people answering the phone, which may become an issue as the program seeks to expand.

“What we’re seeing in the mental health field as part of the mental health crisis is that there’s a shortage of providers,” said Dr. Amanda Fialk, mental health expert and chief clinical officer at The Dorm, a telehealth platform for young adults. “There’s more people who need help than there are people who can provide help.”

Experts say more funding will be needed to not only hire existing mental health providers, but also to recruit and offer training to those interested in the profession.

Copyright 2022, USATODAY.com, USA TODAY. Health and patient safety coverage at USA TODAY is made possible in part by a grant from the Masimo Foundation for Ethics, Innovation and Competition in Healthcare. The Masimo Foundation does not provide editorial input.

https://www.floridarealtors.org/news-media/news-articles/2022/09/need-help-or-worried-about-someone-dial-988

Some Airbnb Hosts Don’t Love Airbnb

Airbnb guests don’t hold back on social media, complaining about costs, amenities and more. Now Airbnb owners are starting to complain about their guests.

NEW YORK – Disgruntled Airbnb guests are taking to Twitter and TikTok to vent about everything from cleaning fees to misleading listings. But they aren’t the only ones with complaints: Airbnb hosts themselves have become increasingly disillusioned with the platform and its disrespectful guests.

On message boards and Facebook groups, hosts are sharing their own challenges and horror stories. One host claimed that a group of guests was unwilling to leave the property despite receiving a full refund from Airbnb.

“I went to the apartment to check what was going on, and I was in shock to discover that the tenants were still in the apartment,” the host wrote on the website AirbnbHell. “They immediately called the police on me and I was kicked out of my own apartment by a team of the police – a complete shock.”

While these anecdotes might seem like the natural byproduct of the largely unregulated short-term rental industry, they speak to larger trends impacting hosts. A 2021 report from Bloomberg detailed how Airbnb’s secretive crisis team spends millions of dollars to cover up crimes and other publicity nightmares in its listings. And the platform recently launched “anti-party technology” in an effort to defray hosts’ frustrations with large, destructive gatherings.

These issues raise the question: Is Airbnb itself the problem – or are the guests?

Silly string and foul odors

In May of this year, Airbnb launched a new “AirCover” protection plan for guests and hosts . It promises quick reimbursement for hosts and up to $1 million in damage protection. And while many hosts consider this policy generous, it still comes with plenty of gray areas.

Emily Muskin Rathner, a digital marketing professional living in Cleveland, began renting her house on Airbnb in August 2021. She says that hosting has been a pleasant and profitable enterprise overall, but a few guests have caused major problems, including a family that rented the house this June.

“They left the house a mess,” she says. “There was human feces on our laundry. They sprayed Silly String all over the place. I don’t care about Silly String, but can you pick it up? It left stains, oddly.”

Muskin Rathner received reimbursement from Airbnb for most of her claims. But some damage, such as nail polish smeared on the bathroom tile, didn’t qualify for reimbursement because she wasn’t able to provide documentation for the cost of the tile. And then there was the smell.

“It really, really stunk. The air conditioning had been left off for a week – in June.”

Red tape everywhere

The early days of short-term vacation rentals offered hosts a simple proposition: Rent your home and earn some extra money. Yet as the industry has matured, it’s been met with regulation efforts from local governments.

Cities such as Denver and Portland, Oregon, have been cracking down on unlicensed short-term rentals, levying fines against hosts and requiring expensive permits. These policies allow local governments to collect taxes and regulate problematic behavior, but they add one more layer of complexity for hosts, many of whom have little experience in hospitality.

Furthermore, many local governments place the burden of tax collection on hosts, not Airbnb. A 2022 analysis by the National League of Cities, an advocacy organization composed of city, town and village leaders, estimated that 82% of cities require hosts to remit taxes themselves, while only 5% require the platform to do so on hosts’ behalf.

Hosts must now not only act as full-time customer service agents and hospitality experts, but also navigate local regulations and master convoluted taxation laws.

Competition from management companies

The romantic notion of home sharing as a means for homeowners to pay their mortgages has given way to management companies inserting themselves and aiming to maximize profits. And small-time hosts can’t keep up with these corporate competitors.

A study of short-term rentals in the U.K. found that the number of listings managed by hosts with a single property dropped from 69% in 2015 to 39% in 2019. And data from the nonprofit Inside Airbnb suggests that only 39.1% of properties in Los Angeles are managed by single-property hosts.

These mega-hosts are able to operate at scale, maximizing efficiency on everything from pricing adjustments to cleaning staff. Single-property hosts can’t keep up, or are unwilling to deal with the hassle, and are being elbowed out of the ecosystem.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. This article was provided to The Associated Press by the personal finance website NerdWallet.

https://www.floridarealtors.org/news-media/news-articles/2022/09/some-airbnb-hosts-dont-love-airbnb

NAR: Aug. Existing-Home Sales Slip 0.4%

National sales declined for the seventh straight month, down 0.4% from July and 19.9% year-to-year. The median home price is still rising, however, up 7.7% in Aug.

WASHINGTON – U.S. existing-home sales dipped slightly in August for the seventh consecutive month of declines, according to the National Association of Realtors® (NAR).

The trend varied across the country month-to-month, however. Of the four major regions NAR includes in its data, two regions recorded increases, one was unchanged and one posted a drop. On a year-over-year basis, however, sales fell in all regions.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – notched a minor contraction of 0.4% from July to a seasonally adjusted annual rate of 4.80 million in August. Year-over-year, sales faded by 19.9% (5.99 million in August 2021).

“The housing sector is the most sensitive to, and experiences the most immediate impacts from, the Federal Reserve’s interest rate policy changes,” says NAR Chief Economist Lawrence Yun. “The softness in home sales reflects this year’s escalating mortgage rates. Nonetheless, homeowners are doing well with near nonexistent distressed property sales and home prices still higher than a year ago.”

Total housing inventory at the end of August was 1,280,000 units, a decrease of 1.5% from July and unchanged from the previous year. Unsold inventory sits at a 3.2-month supply at the current sales pace – identical to July and up from 2.6 months in August 2021.

“Inventory will remain tight in the coming months and even for the next couple of years,” Yun says. “Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years, increasing the need for more new-home construction to boost supply.”

The median existing-home price for all housing types in August was $389,500, a 7.7% jump from August 2021 ($361,500), as prices rose in all four regions – the 126th consecutive month of year-over-year increases, the longest-running streak on record.

However, it was the second month in a row that the median sales price dropped after reaching a record high of $413,800 in June, though home prices have historically peaked in early summer and declined a bit in late summer and early fall.

High profile findings

  • Time on the market – the amount of days it takes after listing a home until it goes under contract – hasn’t change much. Properties typically remained on the market for 16 days in August, up from 14 days in July and down from 17 days in August 2021. In August, eight out of 10 homes (81%) were on the market for less than a month.
  • First-time buyers were responsible for 29% of sales in August, consistent with July 2022 and August 2021.
  • All-cash sales accounted for 24% of August transactions, the same share as in July, but up from 22% in August 2021.
  • Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in August, up from 14% in July and 15% in August 2021.
  • Distressed sales – foreclosures and short sales – represented about 1% of sales in August, essentially unchanged from July 2022 and August 2021.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.22% in August, down from 5.41% in July. The average commitment rate across all of 2021 was 2.96%.

Single-family and condo/co-op sales: Single-family home sales decreased to a seasonally adjusted annual rate of 4.28 million in August, down 0.9% from 4.32 million in July and down 19.2% from the previous year. The median existing single-family home price was $396,300 in August, up 7.6% from August 2021.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 520,000 units in August, up 4.0% from July and down 24.6% from one year ago. The median existing condo price was $333,700 in August, an annual increase of 7.8%.

“In a sense, we’re seeing a return to normalcy with the homebuying process as it relates to home inspections and appraisal contingencies, as those crazy bidding wars have essentially stopped,” says NAR President Leslie Rouda Smith. “In an ever-changing market, Realtors® help consumers successfully manage the complexities of buying or selling homes.”

Regional breakdown

  • Existing-home sales in the Northeast grew 1.6% from July to an annual rate of 630,000 in August, down 13.7% from August 2021. The median price in the Northeast was $413,200, a 1.5% increase from the previous year.
  • Existing-home sales in the Midwest fell 3.3% from the prior month to an annual rate of 1,160,000 in August, retreating 15.9% from August 2021. The median price in the Midwest was $287,900, up 6.6% from the previous year.
  • At an annual rate of 2,130,000 in August, existing-home sales in the South were identical to July but down 19.3% from one year ago. The median price in the South was $356,000, an increase of 12.4% from August 2021.
  • Existing-home sales in the West expanded 1.1% compared to last month to an annual rate of 880,000 in August, down 29.0% from this time last year. The median price in the West was $602,900, a 7.1% increase from August 2021.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/nar-aug-existing-home-sales-slip-04

Aug. Housing Starts Surge 12.2% Thanks to Multifamily

Single-family home starts rose 3.4% last month and are down 4% for the year. But Aug. multifamily starts – apartments and condos – surged 28%.

WASHINGTON – Overall housing starts posted a double-digit gain in August due to a surge in multifamily production. The number reported by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau rose 12.2% to a seasonally adjusted annual rate of 1.58 million units (yearly pace if August sales continue) off of a downwardly revised July reading. The

Within that overall number, single-family housing starts increased 3.4% to a 935,000 seasonally adjusted annual rate, though they’re down 4% so far this year.

However, the multifamily sector, which includes apartment buildings and condos, increased 28% to an annualized 640,000 pace in August.

“Single-family production is running at a weakened pace due elevated mortgage rates and high construction costs that have led to a major slowing of the housing market and exacerbated housing affordability,” says Jerry Konter, chairman of the National Association of Home Builders (NAHB). “The slowdown in the single-family market has been reflected in our builder surveys, which have posted declines every month in 2022.”

Jing Fu, NAHB’s director of forecasting and analysis, says the pace has been below 1 million for the past two months.

“Expected additional tightening of monetary policy from the Federal Reserve, falling builder sentiment and a 15.3% year-over-year decline in single-family permits points to further weakening for the housing sector,” says Fu. “The one bright spot is multifamily construction, which remains very strong given solid demand for rental housing.”

On a regional and year-to-date basis, combined single-family and multifamily starts are 4.6% higher in the Northeast, 2.4% lower in the Midwest, 5.6% higher in the South and 1.5% lower in the West.

Overall permits – an indication of future building activity – decreased 10.0% to a 1.52 million unit annualized rate in August. Single-family permits decreased 3.5% to an 899,000 unit rate. Multifamily permits decreased 17.9% to an annualized 618,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 3.1% lower in the Northeast, 1.2% higher in the Midwest, 1.2% higher in the South and 1.4% lower in the West.

The number of apartments under construction (890,000 residents in 2-plus unit properties) is at the highest level since the first quarter of 1974.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/aug-housing-starts-surge-122-thanks-multifamily

Higher Rates Keep 20% of Sellers from Listing

Many homeowners want to upsize or downsize, but an estimated 20% stay in place to avoid replacing their current low mortgage rate with a higher one.

SEATTLE – Six of every seven (85%) U.S. homeowners with a mortgage have an interest rate that’s far lower than today’s average level of 6%, according to a Redfin analysis of Federal Housing Finance Agency (FHFA) data. For the analysis, Redfin considered a “low mortgage rate” as anything under 5%.

These homeowners may long to upgrade their home or downsize – and may have been waiting years for the chance to do so – but they’re making a financial decision to stay in place.

As a result, higher mortgage rates do more than discourage buyers – they also discourage sellers.

The high share of homeowners who feel locked into their low mortgage rate is contributing to a steep decline in listings, according to Redfin. New listings slumped 19% year-over-year during the four weeks ending Sept. 11, the largest drop since May 2020.

For example, Redfin found that in Atlanta, Chicago, Los Angeles and Washington, D.C., homeowners with a mortgage rate below 3.5% were 7.6% less likely to put their homes up for sale in August than homeowners with a rate above 3.5%.

It’s also a fear of falling prices

Listings are also declining because some owners hesitate to list their home when the market is slowing and prices are starting to fall in some areas.

“The plunge in new listings is hindering growth in housing supply, which is keeping home prices relatively high even though the market is slowing down,” says Redfin Deputy Chief Economist Taylor Marr. “Housing supply fell 1% in August from the month before; normally, it would rise during a downturn.”

Mortgage rates last week eclipsed 6% for the first time since November 2008 – during the Great Recession – as the Federal Reserve seeks to quell inflation. Rising rates have pushed the typical homebuyer’s monthly mortgage payment up 42% from a year ago, fueling a broad slowdown in the housing market.

“The good news is that people who already own homes have locked in relatively low mortgage payments,” Marr says. “The bad news is that homeownership is moving further out of reach for other folks as rising rates, elevated home prices and the persisting housing shortage make buying a house more expensive.”

It’s not all homeowners

Even with higher mortgage rates, some current homeowners still decide to list their home. Thanks to rising home prices, many owners built up thousands of dollars in home equity during the pandemic. For them, moving and taking on a higher interest rate isn’t a huge deal – especially if they’re moving to a more affordable place.

However, the prospect of cashing out that home equity is starting to wane as price-growth slows and homebuyer demand dries up.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/higher-rates-keep-20-sellers-listing

Why List a Home When You Can Collect Rent?

Some sellers have always opted to rent out their old home rather than sell, but skyrocketing rents have pushed even more into that landlord category.

NEW YORK – With single-family home rents skyrocketing and many prospective buyers priced out of the market, renting out an old home has, to some sellers, become more attractive than selling. The result: A shrinkage in listings of homes for sale, which causes prices to rise even as sales lag.

Brokerage HouseCanary reports that the portion of home listings delisted without going under contract climbed 58% in August from a year earlier, although the overall number remains a small percentage of total listings.

“People are hearing that rents are going up, so they’re saying, ‘Well if I can’t sell it for what I want, I’ll just rent it, because I’ll get a really good rent,’” says Anthony Lamacchia, owner of a real-estate brokerage and a property-management company in Massachusetts.

Many homeowners have locked in borrowing costs below the current average mortgage rate, and by opting to rent, would-be sellers are wagering they can still profit from their home’s value if rents continue to appreciate while their mortgage payments remain fixed.

Real-estate agents note that many people choosing to rent out their previous homes consider it a temporary move, and they’re likely to list the home once sales bounce back. Some, though, could elect to rent indefinitely.

CoreLogic estimates that rents for single-family homes rose 13.4% nationwide in June from a year earlier, versus 14% year-over-year growth in April. Yet demand from renters is still gaining, with a John Burns Real Estate Consulting survey finding that 11% of prospective U.S. homebuyers nationally put their ownership dreams on hold and committed to renting again.

Source: Wall Street Journal (09/19/22) Friedman, Nicole; Parker, Will

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2022/09/why-list-home-when-you-can-collect-rent

Mortgage Report: Minority Buyers Grow in 2021

The nation’s consumer bureau (CFPB) found a drop in refinances and increase in buyers, with all minority groups gaining ground in the share of homes purchased.

WASHINGTON – The Consumer Financial Protection Bureau’s (CFPB) annual report on residential mortgage lending for 2021 found an increase in Asian, Black and Hispanic shares of home purchase loans.

The report is based on data submitted by thousands of the nation’s lending institutions under the Home Mortgage Disclosure Act (HMDA), which requires financial institutions to collect and report mortgage loan-level information on applications and originations. CFPB uses that data to determine whether financial institutions are serving the housing needs of their local communities. The data is also used to help communities attract private investment, identify discriminatory lending patterns and enforce antidiscrimination statutes.

The report shows a shift from refinance loans in 2020 to home purchase loans in 2021, with a greater share of home purchase loans going to Asian, Black and Hispanic white borrowers relative to the share of home purchase loans for non-Hispanic white borrowers.

The top 25 closed-end lenders by loan volume held nearly half of the market share of residential mortgage lending – a percentage that has increased each year since 2018.

2021 report key findings

  • An increase in mortgage originations was driven by home purchase loans as refinance loans fell: Closed-end mortgage originations – excluding reverse mortgages – increased by 2.4%, from 13.4 million in 2020 to 13.7 million in 2021. From 2019 to 2020, 66.8% was largely driven by refinances; in 2020 to 2021, most was due to jumbo home purchase loans. Non-cash-out refinance loans began decreasing following a peak in March 2021.
  • The number of mortgage lending institutions reporting HMDA data dropped in 2021: At least one closed-end mortgage loan had been reported by 4,332 financial institutions, down by 3.1% from 4,472 financial institutions in 2020. The top 25 closed-end lenders by loan volume held a combined market share of 43.9%, which has risen yearly since 2018. The top 25 mortgage lenders by loan volume were notably prominent in the refinance market, and accounted for 53% of all refinance loans.
  • Asian, Black and Hispanic white borrowers’ home purchase loan shares increased from 2020 to 2021:
    • Black borrowers’ share of home purchase loans increased from 7.3% in 2020 to 7.9% in 2021.
    • Hispanic white borrowers saw their share of home purchase loans increase from 9.1% to 9.2%.
    • Asian borrowers’ share increased from 5.5% in 2020 to 7.1% in 2021.
    • Non-Hispanic white borrowers’ home purchase loans decreased from 59.1% to 55.6% during the same time period.

    Black and Hispanic white borrowers, overall, continued to qualify for lower median loan amounts, had lower median credit scores, and had higher denial rates compared to non-Hispanic white and Asian borrowers. Additionally, Black and Hispanic white borrowers paid higher median interest rates and higher total loan costs overall.

2021 marks the fourth year that HMDA data reflects changes implemented by the 2015 HMDA rule. The 2015 HMDA rule updated institution and transaction report criteria and revised the data points that covered institutions must report.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/mortgage-report-minority-buyers-grow-2021

Drop in Builder Confidence Continued in Sept.

The homebuilders’ confidence index dropped from 49 to 46 this month, where any number below 50 indicates that pessimism outweighs optimism.

WASHINGTON – Builder sentiment fell for the ninth straight month in September as the combination of elevated interest rates, persistent building material supply chain disruptions and high home prices continued to take a toll on affordability.

Builder confidence in the market for newly built single-family homes fell three points in September to 46, the lowest level since May 2014 with the exception of the spring of 2020, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” says NAHB Chairman Jerry Konter.

“In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”

“In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions,” adds NAHB Chief Economist Robert Dietz.

All HMI components decline in September

All three HMI components that make up the full index posted September declines. Current sales conditions dropped three points to 54, sales expectations in the next six months declined one point to 46 and traffic of prospective buyers fell one point to 31.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell five points to 51, the Midwest dropped five points to 44, the South fell seven points to 56 and the West posted a 10-point decline to 41.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/drop-builder-confidence-continued-sept

Consumers Expect Inflation to Drop by Next Year

Fed survey: Consumers expect the annual inflation rate to be 5.7% a year from now, beating the 6.2% expectation in July – and they’re more optimistic about the future.

NEW YORK – Consumers expect prices to fall across most areas of spending, according to a recent survey from the Federal Reserve Bank of New York.

In the August 2022 Survey of Consumer Expectations, consumers said they expect the annual inflation rate to be 5.7% a year from now. That’s an improvement from the Fed’s July survey, in which respondents said they expected the rate to be at 6.2% next year.

Three-year inflation expectations fell to 2.8% in August, down from 3.2% the previous month. And consumers said they expect prices to decrease further over the next five years, projecting that the inflation rate will hover around 2% in 2027.

The survey said that expectations for the prices of gasoline, food and rent over the next year also moved lower in August. And consumers reported feeling more optimistic about their “future household income and financial situations,” the New York Fed said.

“Median inflation uncertainty – or the uncertainty expressed regarding future inflation outcomes – decreased at the short-term horizon and was unchanged at the medium-term horizon,” the survey said.

Consumers expect home prices to cool

The New York Fed survey said that the consumer outlook on rising home prices has also improved. The expectation fell to 2.1% in August from 3.5% in July, marking the lowest reading since July 2020.

“The decline was broad-based across demographic groups and geographic regions,” the survey said. “Home price expectations have now fallen by nearly two-thirds since the April 2022 reading of 6.0%.”

Consumers aren’t the only ones anticipating a cooldown in home prices. CoreLogic predicted that home price growth will slow to 3.8% year-over-year by July 2023. And Black Knight’s data showed that median home price growth in July fell 0.77% from June – the most significant single-month decline since January 2011.

However, consumers also indicated that they are less optimistic about financing options.

“Perceptions of credit access compared to a year ago deteriorated, with the share of households reporting it is harder to obtain credit than one year ago increasing to a new series high,” the survey said. “Similarly, expectations for future credit availability also deteriorated, with the share of respondents expecting it will be harder to obtain credit in the year ahead increasing to a new series high.”

Inflation rate still off the Fed’s 2% goal

The New York Fed’s consumer data was released just prior to the most recent inflation reading from the Bureau of Labor Statistics (BLS).

The Consumer Price Index (CPI), a measure of inflation, surged 8.3% annually in August. This is down slightly from 8.5% in July and a four-decade high of 9.1% in June. On a monthly basis, prices rose 0.1%, after a flat reading in July.

Lower gas prices helped offset the rise in other expenses like food, medical care and rent, according to the BLS report.

This reading will likely impact the Fed’s decision on how much it should raise interest rates going forward as it continues its fight against rising inflation. Federal Reserve Chair Jerome Powell said at the central bank’s annual symposium in Jackson Hole, Wyo., last month, that the target was to bring inflation back down to 2%.

© Copyright © 2022 Local TV LLC, The Credible Money Expert. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2022/09/consumers-expect-inflation-drop-next-year

Rising Prices, Rates Hurt Middle-Class Buyers

RAPID CITY, S.D. – Homeownership remains Americans’ top financial priority, but many would-be buyers in the West see little chance of achieving that goal.

Even as the historic housing-price runup slows, middle-class buyers are struggling like never before to find a home they can afford in a place where they want to live.

House-hunters are finding fewer homes for sale as builders ease off on new construction, and when they do put in bids they find themselves competing against out-of-state investors whose all-cash offers are hard for sellers to resist.

Landlords are jumping into the frenzy and selling rental properties, driving apartment availability down and rents up.

This imperfect storm has sparked a housing affordability crisis that is especially severe in western states, where the cost of buying a home has spiked as much as 25% in some cities in just the past year.

In western Montana’s Ravalli County, the median home sales price went from $309,000 in 2019 to $682,500 in June of 2022, according to the Missoula Organization of Realtors. That’s a 120.8% increase.

Despite rising prices, however, the desire for home ownership remains strong.

“Asked to rank the hallmarks of economic prosperity, 74 percent of Americans say they place the highest priority on owning a home,” an analysis by New York-based Bankrate says. That outranks the ability to retire (66%), have a successful career (60%), own an automobile (50%), have children (40%) and get a college degree (35%).

Napa, California house hunters Adam Padilla and Caroline Helper were among that group. They started looking to buy a house in the spring, but their bids were repeatedly rejected.

“I was very discouraged,” Padilla said. “We’re trying to build a life here and be a part of the community … but Napa is trying to push us out. It felt like we weren’t welcome.”

They ended up buying a house for $75,000 over the listing price of $575,000.

“I knew that was the game we were playing,” Padilla said. “The listing price was never the asking price; it was the starting price.”

How we got here

The inventory of homes for sale was already tight as the nation slowly recovered from the 2008 housing crash.

Construction on new infill houses, subdivisions and even master-planned communities started once again in 2015 and 2016.

Then came the COVID-19 pandemic, which changed everything.

Unsure what the broad lockdowns and closures of businesses and schools would mean for new housing, many homebuilders paused construction in early 2020.

The federal government stimulated the economy with checks, mortgages were forgiven for a time, and interest rates dropped.

That resulted in growing savings accounts and, as weeks turned into months at home, juggling a laptop and a toddler, many people decided it was time to move up from an apartment to a house, or to trade their starter home for something roomier.

In the summer of 2020, homebuilders began eagerly pulling building permits again and existing homes were selling within days of being listed – often for substantially more than the asking price.

As the pandemic entered its second year, many employers made work-from-home permanent, leaving workers free to relocate from expensive markets and buy homes in smaller markets with cash.

Suddenly places such as Tucson; Casper, Wyo.; Rapid City, S.D.; and Missoula, Mont., were greeting new residents and watching housing prices rise and rise.

Investors got in on the action, snapping up homes and flipping them into rentals for younger, remote workers wary of committing to a 30-year mortgage.

Housing analysts called it all crazy and declared it unsustainable.

But the sizzling hot market continued into 2022, when inflation and rising gasoline prices started to take a toll.

The federal government once again intervened by raising mortgage rates to try and cool things down.

Mortgage rates went from around 3 percent at the beginning of the year to a current average of about 5.5 percent on a 30-year loan.

That pushed up monthly payments for traditional buyers who were already paying more to fill up the gas tank and buy groceries.

This summer, homebuilders have faced a surge of cancellations of homes under construction by people who had placed down payments on new homes and then backed out as interest rates rose. Builders have paused on new-home starts while they try to find new buyers for the homes already under construction.

“This places many builders in a ‘wait and see’ mode,” said Jim Daniel, a housing analyst in Arizona.

In the coming months, the ability to sell those homes already under construction will determine if homebuilder confidence returns.

If not, consumers will continue to struggle to find a home within reach.

Must pay above asking price

Some buyers see no choice but to spend more than they intended to buy a house.

After living in western Montana’s Bitterroot Valley for years, Ann Damrow and her husband decided to move to Spring Creek, Nevada, where their son and his family live.

When the couple found a home they liked, they were advised to act quickly and offer more than the asking price.

“I was going to just offer a certain amount, which I thought was fine, and my husband said that will never do it,” Damrow said. “So he took the phone, and we offered them ‘x’ amount over, which I thought was really high.”

That offer got them the house – which they had never seen in person.

Their home in Montana had two offers the day after being listed, both for more than the asking price.

“They didn’t even ask for an appraisal; they didn’t ask for anything, They just wanted to throw cash at us,” Damrow said. “It was amazing.”

Some buyers are still trying, but not finding much success.

Flagstaff unaffordable

Tammy Day’s husband used to be a truck driver, so the two have traveled across the country. They decided to move west after discovering the dry climate was easier on Day’s health.

After some shopping around, they fell in love with Casper.

“The people that we met were very friendly,” Day said. “We didn’t meet a single person that we would classify as a stranger.”

But the couple is in the unenviable middle-class position of making too much for income-restricted housing in Casper but not enough for market-rate.

Tina Cubbon moved to Flagstaff in 2016 with her son, who is now 18.

They had been driving up from Phoenix every weekend so he could compete on the USASA snowboard team and decided to move there.

After the condo they rented for the first year was put up for sale, Cubbon found their current apartment.

She has wanted to buy a home for a while, but “housing prices started going up but not like they did last year. This last year was crazy.”

Cubbon switched careers during the pandemic so she needs to stay in her job for two years before she can qualify for a loan. Two years will be up in March, but she expects a longer wait for Flagstaff’s housing market to cool down.

“The average home price in Flagstaff for a two-bedroom home is $600,000,” she said. “The FHA loan limits in Flagstaff are $441,600 – the last time I checked – which means I’d have to come up with a down payment of around $100,000 to $160,000 in order to qualify for a home.

“The homes that are around the $400,000 price range are few and far between,” she added. “Home prices in the $300,000 price range — they do not exist.”

‘It just got so competitive’

San Diego resident Nicole Hernandez spent seven months searching for a house for herself, her husband and her 13-year-old son.

The owner of the house they had been renting decided to sell because the market was so hot.

They were hoping this would be their chance to buy their own home.

“It just got so competitive,” Hernandez said. “People were buying in cash, and people were outbidding other bidders just to be able to get the home. If you didn’t go and look at the house when your Realtor says, ‘We’ve got an appointment’ – say you’ve got work or something – that house was gone within that weekend.

“It forced us out of the market.”

Copyright © 2022 Rapid City Journal, with writers Emily Hamer, Mary Steurer, Jennifer Huffman, Abigail Kessler, Tim Burmeister, Shayla Escudero with Lee Enterprises contributing. Part of the Squeezed Out series. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2022/09/rising-prices-rates-hurt-middle-class-buyers

HUD Seeks to Help People Without Access to Shelters

WASHINGTON – The Department of Housing and Urban Development has opened up millions of dollars in funding for groups serving unhoused people in rural areas – an unprecedented move by the agency, say housing advocates.

People living in cars, parks, and on the street at night, which the agency labels unsheltered homelessness, has increased across the nation, particularly in urban areas on the West Coast, but rural areas across the country are also being affected, a department spokesperson said.

Continuums of Care, the planning bodies that address homelessness within specific regions, have until Oct. 20 to apply for a portion of $54.5 million targeted at rural homelessness. HUD could not provide an estimate for how many organizations would benefit from this funding but said that 127 of them are eligible to apply.

According to the department’s January 2021 report to Congress, 2020 was the first year since it began collecting this data in 2005 that there were more unsheltered unhoused people than people living in shelters. The report also noted that “largely rural [Continuums of Care] had the largest percentage of people experiencing homelessness in unsheltered locations” at 44%, compared to 39% in Continuums of Care that include major cities. From 2019 to 2020, there was an 8.3% increase in unsheltered homelessness in largely rural Continuums of Care.

Steve Berg, vice president for programs and policy at the National Alliance to End Homelessness, said the housing challenges are different in rural areas. Berg said the issue in rural areas is not always a lack of housing as it is in urban areas but a lack of safe housing.

“In rural areas, there’s housing and a lot of it is vacant or it’s run down. It’s not kept up well, so it’s substandard housing. If that goes on for too long, then people just can’t live there safely.”

Berg added that the systems in place for addressing homelessness in rural areas also operate differently from urban areas.

“There aren’t homeless programs in a lot of rural areas. A county that’s mostly rural might get a little bit of federal homelessness money, but it’s not enough to really run a program or people’s salaries,” he said. “So in a big city, you’ve got a whole sort of system of homeless programs that are dealing with different aspects of the problem and are overseen usually by a centralized agency that makes decisions about how the funding will be doled out and who will go to work. None of that really exists in a lot of rural areas.”

Service deserts

Adrienne Bush, executive director for the Homeless and Housing Coalition of Kentucky, said that understanding how many unhoused people are in rural areas is challenging because of “service deserts” where there aren’t shelters or housing programs available to count the number of unhoused people.

Bush said that there is a need for more resources for outreach as well, which looks different in rural areas. For example, it could require going to a state park and walking up and down river beds rather than going to an encampment under an overpass.

In 2020, the states with the highest percentages of unsheltered unhoused people overall were Nevada, Oregon, California, Hawaii and Arkansas. Meanwhile, Maine, New York, Nebraska, Massachusetts and North Dakota had the lowest rates, according to the 2021 HUD report.

HUD also has $267.5 million in funds available to address the unsheltered homeless population in non-rural areas.

The report also found that largely rural Continuums of Care that had the highest percentages of unsheltered unhoused people were in West Tennessee, including the city of Jackson; Lake County, California; and seven counties in Florida: Hamilton, Columbia, Suwanee, Lafayette, Hardee, Highlands and Hendry.

The HUD funding will begin to address the challenges advocates describe.

Brenda Gray, executive director of Heartland Coalition for the Homeless in Florida, whose coverage area includes Hendry, Hardee and Highlands counties, said that some of the challenges to preventing homelessness in the area include a lack of affordable housing.

Gray said she hopes that at least a few of the six counties the Heartland Coalition serves will be selected for projects. One possible project she’s looked at would be a pilot project in Hendry County for 12 or 13 tiny houses on a third of an acre of land.

“We’re a small Continuum of Care and what we really need funds for is a housing specialist. My clients that we serve right now – we try to assist them as much as we can in locating housing,” Gray said. “But without a housing locator or a housing specialist, there’s not too much we can do. So what we ask them to do is to find housing and then we will help you get into that place financially, providing you will qualify. So housing specialists and outreach is the most important in my point of view. Because we’ve got a case manager trying to do everything.”

Housing first policy

Bush said that she sees the HUD funding as an opportunity for areas that can’t supplement federal dollars with money from their local general fund and tax base like Louisville and Lexington can.

“Some of these smaller communities, say like Hopkinsville, Kentucky, don’t have that luxury and so whatever money for homeless services they have, it’s going to be coming from the federal government and dependent on whether there is a local organization that has the capacity to apply for and deliver high quality services with federal funds,” she said. “The state is not supplementing anything from its general fund towards homeless assistance and that is unfortunately true for a lot of southern states.”

She added that one of the things she likes about the funding opportunity is that it incentivizes projects that have partnerships with housing providers.

“The idea here is to increase the [housing] stock and streamline the process from people experiencing homelessness to actually get into the housing,” Bush said.

Copyright © 2022 Athens Messenger, APG Media of Ohio LLC. Casey Quinlan is an economy reporter for States Newsroom, based in Washington, D.C. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2022/09/hud-seeks-help-people-without-access-shelters

NAR Mentorship Program Discovers New Opportunities

The NAR Spire program pairs real estate pros in underserved areas with experienced practitioners to help them explore and expand their business opportunities.

CHICAGO – As the housing market slows, real estate pros may find it’s a perfect opportunity to explore new niches and expand their business opportunities. They’re finding that NAR Spire, the National Association of Realtors®’ mentorship program, may provide guidance and encouragement.

The program, which kicked off last year, aims to help real estate professionals in underserved areas grow their businesses. Participants are matched with experienced agents and receive one-on-one mentorship and tips on business operations. Participants also can take advantage of live educational events and use NAR Spire’s online platform to connect.

“Through Spire, it is our hope … to lead new and blossoming members through their own processes of professional growth, advancement and transition,” NAR CEO Bob Goldberg wrote in a recent column for The American Genius. The program aims to attract people from different backgrounds to the real estate profession.

Goldberg highlights an example of how the program has helped real estate pros discover new niches and business pathways. He shared the story of real estate pro Ahmed Islam in Lehigh Valley, Pa., who took part in the program to finally fulfill his dream of jumping from residential real estate to commercial real estate. He first became involved with NAR Spire in 2021. Islam said he tried unsuccessfully for seven years to make the jump into commercial real estate, and his mentor helped him make the leap in seven months. They met every other week via Zoom initially and continue to meet at annual NAR conferences.

“Mentors are not there to build your business—they’re there to guide you,” Ahmed said, as noted in Goldberg’s article. “And [my mentor] was a great guide.”

Source: NAR

© 2022 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2022/09/nar-mentorship-program-discovers-new-opportunities

How to Use a Multiple-Offer Mindset

While the market is shifting, homes are continuing to receive multiple offers. Agents should prepare clients for it and find out as much as possible about the property.

WEST CHESTER, Penn. – Although the housing market is shifting, homes are continuing to receive numerous offers. Susan Austin of The Tom Toole Sales Group says when a buyer is ready to submit an offer, the seller should immediately contact the listing agent to get more information, such as whether other offers were submitted and the seller’s preferred terms and conditions.

This information can help agents and their client submit a strong offer that seeks to take into consideration all parties. The aim is to develop and maintain lasting professional relationships that can potentially generate future business and influence the outcome of a deal.

Agents also need to focus on preparation, which entails becoming as knowledgeable as possible about the property and having everything in place to submit a same-day offer. If a prospective buyer is certain they want to put an offer down on a property before leaving the driveway, agents can start the process using a virtual assistant.

Agents should also prepare their clients for the purchase journey. Pre-approved clients who know their price range and how much they can offer as a down payment save time and are poised for success.

When a client is ready to close, agents should put together several versions of the estimated closing costs to help them determine what course of action works best for them.

Agents should always assume the sellers are reviewing multiple offers alongside their client’s, even if no other offers were submitted. The best homes – when adequately marketed and priced correctly – are still selling quickly. 

Source: Inman (09/09/22) Toole, Tom

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2022/09/how-use-multiple-offer-mindset

Downsizing Dilemmas: Unexpected Delays, Expenses

SEATTLE – Louise Angel Kiss and her husband, Charles, lived in their four-bedroom, split-level house in the Seattle suburb of Bellevue, Washington, for 40 years. Their two daughters had moved away long ago, and the couple decided they’d had enough of the stairs and the hassles and costs of upkeep. Like many older homeowners, they decided to downsize. In 2018, the couple chose a two-bedroom unit at a continuing care retirement community in nearby Issaquah, which would provide assisted living and nursing care if they needed it.

“We had our bubble of security and safety,” said Louise Kiss, 81, a travel agent. Charles Kiss, 86, sold a dry-cleaning business years ago. During the process, however, the couple discovered what many prospective downsizers do: more expenses and headaches than they’d anticipated.

Despite the hot Seattle-area housing market, their house did not sell until they spent $20,000 to remove the popcorn ceilings and renovate the kitchen. The delay in getting money from the sale forced them to take out a bridge loan to pay the community’s hefty entrance fee on their new apartment.

“We were not happy we had to go through all that,” Louise Kiss said. “If I were advising someone who is downsizing – make sure you have all your ducks in a row and are prepared for any contingencies.”

Like the Kisses, Dale and Marian Boyd were in for a surprise when they put their four-bedroom ranch house in Newnan, Georgia, up for sale a year ago. The couple were asking top dollar and figured they would have time to look for a new place before their house sold. It sold in one day.

Two weeks later, they placed much of their furniture in storage and moved to a rental house, where they lived for nine months, at $2,000 a month. In the meantime, they signed a contract for a house that had not yet been built. They moved into it in July.

“We got caught with our pants down,” said Dale Boyd, 75, who owns a plumbing contracting business. “We had not decided where we wanted to live yet.”

Get real on housing costs

One way to avoid such surprises is to thoroughly check out the housing market before putting out the “For Sale” sign. Older homeowners should consult with several real estate agents and appraisers to get a realistic picture of what their house might sell for and what smaller homes might cost.

This is particularly important to do right now. Though local markets differ, empty nesters hoping to make a killing on the sale of the family home may be disappointed. Rising mortgage rates and a declining stock market are making it more difficult for younger home-seekers with families to afford the down payment and monthly payments for a large, pricey home, said Kari Haas, a real estate broker in Bellevue who helped the Kisses sell their house.

Haas said many older homeowners had delayed downsizing during the worst of the pandemic, and homes were now lingering on the market. Also, she said, sale prices have dropped since earlier this year, when mortgage rates began to rise. At the same time, she said, older buyers are competing with younger buyers for less expensive, smaller homes. “There are not a lot of smaller ramblers and single-level town houses to go to,” Haas said.

In addition to determining sales prices, homeowners could figure out possible savings by comparing the expenses expected at a new place with those at their current place, experts say.

One often overlooked line item for sellers: closing costs, which could reach between 8% and 10% of the sales price, according to the real estate website Zillow. Those typically include a 6% real estate agent commission, though sellers could try to negotiate a reduction to that charge. Moving costs and home staging, such as new paint, floors or remodeling, will also eat into profits.

Mike Robinson, a real estate agent in Peachtree City, Georgia, outside Atlanta, said homebuyers who planned to move into condominiums or independent homes in planned 55-plus retirement communities also needed to budget for monthly fees. These homeowners association fees pay for security, grounds maintenance, and amenities such as pools and fitness rooms. They are generally not tax-deductible and can range from $100 to more than $1,000 a month.

Buyers should be sure to ask what the fees cover. In some communities, for instance, they do not cover lawn care or parking.

Robinson, who is Dale Boyd’s brother-in-law and helped with the sale of his house, also said retirees should take a close look at a potential destination’s taxes. States vary on how they tax retirement income, and property taxes differ by locality. Even if your new house is smaller than your old one, your property taxes may not drop, depending on the new home’s value and its tax rate.

“If you’re turning 65 in our area, you could save a considerable amount on property taxes,” said Robinson, referring to his county’s income-based partial tax exemption for seniors.

If your house has appreciated significantly over the years, capital gains taxes could crimp cash proceeds from a sale. Homeowners who have owned and lived in their home for at least two of the five years before the sale could owe capital gains tax on any profit above $250,000 for singles and $500,000 for joint filers.

Widows and widowers may be eligible for the $500,000 exclusion if they sell within two years of a spouse’s death and have not remarried at the time of the sale.

The long-term capital gains tax is generally zero percent, 15% or 20%, depending on one’s income during the year of the sale.

Samantha Kennedy, a certified financial planner in Bellevue, said she had advised some clients who owned highly appreciated homes to hold off on a sale until the year of their retirement, when their income likely dropped. “If your income is lower, you will have potentially lower capital gains tax,” she said.

Kennedy said homeowners who had experienced large home appreciation should gather their records of major improvements over the years, such as remodeling or a new roof. Sellers can reduce the taxable gain by adding those costs to the original purchase price of the house.

Louise Kiss said she and her husband had paid capital gains tax on the sale of their home. On top of that, the money they earned from the sale beyond $500,000 drove up their income-related monthly Medicare premiums for the year. And because their premiums are deducted from their Social Security payments, they received smaller monthly benefits. “That really hurt,” she said.

Improving cash flow

Many downsizers expect to improve their retirement income stream if their new home costs less than what their old house sells for. Lower utility costs, insurance and property taxes – as well as investment returns on the proceeds – can also improve the bottom line. Though a certified financial planner can help run the numbers, you can get some idea of the benefits by plugging your data into the move-or-stay-put calculator of the Center for Retirement Research at Boston College.

You can use the same calculator if you are thinking of renting rather than buying after selling your house.

“If you don’t want any home maintenance, renting may make sense,” Kennedy said. And because closing costs can be steep, renting also may be a good option for downsizers who expect to move again within several years, she said.

Despite their unexpected costs, Louise and Charles Kiss improved their cash flow after they sold their house. With the proceeds of the house sale, the couple were able to repay the bridge loan for the upfront entrance fee at a retirement community called Timber Ridge at Talus and invest the balance, about $250,000, in U.S. Treasury bonds. They cover the monthly fee and other expenses with interest on those bonds, retirement savings, Social Security benefits, Louise Kiss’ income as a travel agent and a pension she receives as a retired nurse for the state medical system.

The couple have few additional expenses beyond groceries, the occasional cruise and dinners out with friends. The community’s monthly fee covers utilities, maintenance, weekly apartment cleaning, and many meals and amenities. They have gone from two cars to one, saving on insurance, gas and repairs. If the spouses need transportation at the same time, the retirement community provides a free ride service.

Beyond finances

For the Kisses and the Boyds, the lifestyle their new homes would provide was as important as any financial consideration.

Retirees who are looking to shrink their square footage should carefully consider the kind of life they want to lead, said Andrew Carle, the lead instructor of a graduate curriculum in senior housing administration at Georgetown University.

“Plan it the way you plan a lot of things in life,” Carle said. “Do you want to be near the grandkids? Do you like the neighborhood you’re in? What are your interests and hobbies?” He said retirees should also consider their health needs for the next five or 10 years before deciding on a new place.

The Boyds were living in a golfing community and eventually moved to a smaller house on a smaller lot in a 55-plus community in the same city.

“It was not a financial burden,” Dale Boyd said. “We had aged past the lifestyle we had in that house.” They were paying extra for the community’s country club that they rarely used, and he no longer wanted to maintain the lawn on his half-acre property.

The Boyds sold their house for about $500,000 and bought the new one for $450,000 with cash from the sale’s proceeds. A $300 monthly fee covers lawn care and access to a clubhouse with a fitness room, tennis courts and a pool.

“We moved for location and lifestyle, rather than finances,” Dale Boyd said. “We wanted proximity to our kids and our friends and the neighborhood we lived in for many years.” Their son, daughter and five grandchildren live nearby.

As for the Kisses, finding a place that could attend to future health issues was paramount. So was social interaction with other residents, including Louise Kiss’ sister, who lives in the complex. Kiss, who is now the social chairwoman for her floor, recently organized a summer social on the patio with hamburgers, ice cream and “the whole works.”

“At the beginning, I had to get used to the fact that the place was so much smaller,” she said. “But I would walk to the lobby or the library or the rec room and hear a lecture in the auditorium, and I was fine.”

© Copyright, 2022, Sarasota Herald-Tribune. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2022/09/downsizing-dilemmas-unexpected-delays-expenses

ARMS Are on the Rise as Interest Rates Soar

Facing higher home prices and rising interest rates, some buyers are now turning to adjustable-rate mortgages to bring down their costs, at least initially.

FORT LAUDERDALE, Fla. – As interest rates shoot up, some buyers are turning to a different, and slightly more risky type of mortgage.

Adjustable-rate mortgages, known as ARMs, have seen an uptick in popularity recently as home shoppers, eager to avoid soaring interest rates amid a torrid housing market, are turning to these loans in order to nab a cheaper rate.

“People are looking at ways to bring down their housing costs and their mortgage payments and with an adjustable-rate mortgage, it gives you the possibility of having a lower monthly payment initially,” said J.C. de Ona, southeast division president of Centennial Bank.

Still, there is risk involved. One of the biggest risks for these types of mortgages is that a homeowner’s monthly payment could change frequently, depending on various factors. There’s a chance that it could be lower if rates at the time are low, but there is also the possibility that a buyer’s monthly payment could jump.

“Whether the rate will go up and if the payment is going to go up is a concern for many,” said Diane Mastay, mortgage director with Tropical Credit Union. “But when you have five years or so of lower payments, a lot of things can change. Some people refinance. Others sell their properties. But there are limits in place on the adjustments.”

Nationally, the share of mortgage applications for ARMs has reached its highest level since 2007. An analysis from Zillow shows 12.6% of mortgage applications were for ARMs in June, and 12.2% of mortgage applications in July were for ARMs.

And local lenders are also seeing an uptick among the buyers.

Tropical Financial Credit Union in Miramar has seen a 25% to 30% uptick compared to the norm in buyers wanting to use ARMs to get a home, Mastay said.

Centennial Bank’s southeast division has seen about a 10% to 20% uptick over the past few months. Hamilton Home Loans, with divisions throughout Florida, has seen a 25% to 30% increase recently at their offices.

What is an adjustable-rate mortgage?

An adjustable-rate mortgage has a fixed interest rate for a set period of time, usually anywhere from a year, three years, five years, seven years or 10 years, before the interest rate starts to change.

After the initial period ends, the interest rates changes based on the index, (usually decided by the Secured Overnight Financing Rate) plus the margin, which is a fixed-interest rate that remains the same during the loan period. Some ARMs adjust the interest rate every year, while some adjust every six months.

The initial mortgage rate for an ARM is almost always lower than for a fixed mortgage. Currently, on average the rate for a 5/1 ARM is around 4.6%, while a fixed mortgage rate is a little over 6%, making the starting monthly payments for a home buyer more affordable.

The crash of 2008, and growing popularity today

Buyers might think of the 2008 crash when they hear about ARMs, but experts say the traditional adjustable-rate mortgages some buyers are taking advantage of now are far different from the subprime lending that took place before the last housing crash.

Now, lending practices are stricter and lenders make sure that a buyer is qualified to buy a home.

There’s a few reasons why these loans are gaining in popularity amongst homebuyers, a main one being the rise in interest rates and higher cost of homes.

“Earlier this year, Frannie Mae and Freddie Mac made a change to loan level price adjustments for second homes and in Florida, we have quite a few second-home buyers. And adjustable rates became an affordable solution to help deliver a more affordable payment to some of those folks,” said Deanna Adinolfo-Rivera, senior vice president regional sales manager with Hamilton Home Loans. “And for some people, it gives them the shorter-term lower payment while they wait for a decline in rates and refinance to a fixed mortgage.”

Copyright © 2022 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2022/09/arms-are-rise-interest-rates-soar