While some buyers have had to handle much larger mortgage payments, some sellers began to notice offers of $100,000 over asking price may now be a thing of the past. 

“Right now, weâ€re in this cauldron of uncertainty,” said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants. “Housing hates uncertainty. The biggest enemy of the housing market is uncertainty, and we have buckets full of uncertainty.”

What is causing such a shift in the real estate market? High interest rates for one. Unless youâ€re able to pay in cash, buying a house got even more expensive.

Since December of last year, mortgage rates have nearly doubled. Right now they are around 6% which is the highest they have been since 2008. All in a response by the Federal Reserve to try to control inflation. At the beginning of the year, a buyer would have paid about $2,100 a month in principal and interest for a $500,000 home loan. If a buyer purchases that home today, their loan would cost nearly $1,000 more. 

Combined with the current home prices, which rose more than 20% between May 2021 to May 2022, most buyers arenâ€t able to make adjustments for that kind of increase in interest rates. 

“Thatâ€s a one-two punch that a lot of buyers canâ€t overcome,” said Rick Sharga, an executive vice president of market intelligence at ATTOM, a real estate data company.

In 1981, interest rates peaked at 18.4%. Experts arenâ€t thinking rates will return to those levels however until inflation is under control, rates will continue rising.

“When inflation peaks, mortgage rates will have peaked, and thatâ€s really the key ingredient,” said Greg McBride, the chief financial analyst at Bankrate.com. “If we get more inflation numbers like we did a couple of weeks ago, there is no telling how high mortgage rates could go.”

Itâ€s unlikely that prices will drop dramatically but there are some signs of slowing. According to a recent Refin report, 6.5% of listings dropped their prices each week.

Prices are slightly down but demand is down too. The Redfin report also found that fewer people were searching for homes and touring properties. Pending sales fell 13% and mortgage applications were down 24%. According to Redfin, this is the largest drop since May 2020.

The market could return to levels resembling the pre-pandemic era. Homes could take a few months to sell. Buyers may be able to make a few demands again– request sellers pay closing costs, asking for appraisals and inspections– rather than having to buy site unseen or pay well over asking price. However, it is still a sellerâ€s market. According to the National Association of REaltors, the median price of a home in the U.S. rose above $400,000 for the first time.

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“Itâ€s been incredibly frustrating,” said Erin Damato, in an interview with Bloomberg. “House prices have gone up about $100,000 since weâ€ve been looking.”

Damato and her husband have been seriously hunting for a home in New Jersey since last fall to house their growing family. They are finding that even $1 million isnâ€t enough to meet their needs.

In January, the Damato family big $828,000 for a house that was listed at $750,000 in West Orange which is about 20 miles west of New York City. After placing that big, they learned from their real estate agent that of the more than 20 offers received, theirs wasnâ€t even in the top five.

Itâ€s par for the course to lose out in a bidding war in the red-hot U.S. housing market. Millennials who are starting families, remote workers with location flexibilities and the concerns over rising mortgage rates are only adding fuel to the fire. About 70% of offers were in bidding wards up about 60% from the year before according to Redfin. It made January the most competitive month ever.

The average 30-year fixed mortgage rate was 3.92% in mid February. This is up from a record low 2.65% in early 2021. A $500,000 loan with a 30-year mortgage has a monthly payment of about $2,364. Last yearâ€s low saw those payments at $2,014. Investors expect the Federal Reserve to hike interest rates several times this year to respond to soaring inflation though it doesnâ€t seem to be deterring buyers.

“Rising mortgage rates are intensifying an already-severe shortage of homes for sale because buyers are feeling more urgency to buy while homeowners are feeling less urgency to sell — an imbalance thatâ€s fueling an increase in competition,” said Redfin Chief Economist Daryl Fairweather.

A combination of luck and resourcefulness are allowing some buyers to snatch up a house that was subject to bidding wars. In an interview with Bloomberg, Gianna Gordon said she big $235,000 for a home listed at $215,000 in Atlanta. According to Gordon, the offer was initially rejected in favor of an offer from an investor however when the offer fell through, Gordon was asked if she was still interested.

“You have to do a little bit extra to get the attention of the owner,” she said. Gordon offered to pay $800 in relocation expenses for the seller. She credits that creativity for sealing the deal. According to Redfin, many successful bidders are seeing similar results. Several homebuyers are shortening or waiving the inspection contingency and offering to increase their down payment if the appraisal comes in low.

Spokane, Washington; Sacramento, California; and Seattle have the highest bidding war rates of the 40 metro areas surveyed by Redfin. 83.3% of offers in Spokane saw a bidding war in January while Sacramento and Seattle saw 80.4% and 79.7% respectively.

Raleigh, North Carolina ranked ninth with 75% of offers receiving competition. Charlotte came in at number 17 with 72.5% of competing bids up from 66.7% in January 2021.

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Low inventory and high demand have made the market competitive. About 25% of Americans who planned to buy a home in 2021 said they made at least one offer on a home that didnâ€t end in an accepted offer. A competitive offer is one of the best ways to ensure going under contract. While having the highest offer does help, itâ€s also a good idea to make it simple and convenient for the seller. Demonstrating your ability to pay with a preapproval, willingness to have a speedy closing, and offering to buy the home as-is after itâ€s inspected can all help putting your name at the top of the pile without taking on unnecessary risks.

Being flexible may work in your favor because available homes may not be perfect homes. Many of the unsuccessful buyers of 2021 say they held off because a home didnâ€t meet all their needs. One suggestion as you begin shopping is to make a list of all the features youâ€d like in a home and then cross off those that arenâ€t deal breakers. The more you can compromise on, the more likely youâ€re able to land a home.

Buying in 2022 is likely not to be much different. Nearly one-fourth of failed buyers in 2021 say they held off buying because think it will be easier in 2022. The rate of growing prices may level off at some point this year, but prices arenâ€t likely to drop down drastically. The likeliness of dramatic change in the housing inventory is slim as well. According to the same NerdWallet survey, 89% say concerns about being able to find or afford a new home is holding them back. Having realistic expectations can help cushion you from disappointment and help you plan to beat out other buyers.

While it may be tempting to borrow more to land that perfect home, donâ€t burst your budget to get under contract. About 24% of last yearâ€s buyers said they walked away because they couldnâ€t afford anything on the market. Be smart when setting up your budget and stick to it. Finding yourself “house poor” because you stretched yourself thin can lead to sleepless nights and regret. Using a home affordability calculator can help point you in the right direction.

Buying a home is generally a long-term goal and it can take some time to get your credit and income at mortgage-ready levels. 16% of home shoppers in 2021 cited not being able to qualify for a mortgage. Aiming for a credit history that shows on-time payments, manageable debt and a down payment can make your application more attractive to lenders.

You can read the full report here.

The post Lessons Learned From Last Year’s Unsuccessful Homebuyers appeared first on Charlotte Real Estate.

There are several things to consider before you make an offer on a house. First, have you gotten a mortgage preapproval from at least one lender? It is ideal to get preapproved before you start looking at houses because this will allow you to learn how much house you can afford. The preapproval also lets the seller know youâ€re a serious buyer who can close the deal.

Next, consider your market to ensure your offer is competitive. Your real estate agent can provide you a comparative market analysis or you can gather the information from your own research. Submitting an offer that is slightly less that your preapproval amount will allow you some room to negotiate.

Lastly, verify with your lender that the down payment required is in the bank and ready to go. Having the money set aside or assets planned for the funds to buy the home isnâ€t enough to ensure a smooth transaction. Having direct money with immediate access for the earnest deposit, down payment and closing costs is essential. Only the earnest money will be paid right away. It gets transferred into an escrow account after your offer is accepted.

While it may be called an offer letter, it is a legally binding agreement. The offer typically contains the homeâ€s legal address along with a legal property description, details regarding the price and terms, the amount of money and terms concerning the earnest deposit, title, closing costs, the date and time of the offerâ€s expiration, a projected loan closing date, and contingencies.

When you man an offer on the home, you will most likely be required to include a deposit known as earnest money. This is given to a neutral party like an escrow agent or a real estate title company. These entities will hold the money in escrow and can be anywhere between 1% and 3% of the total purchase price. The offer letter will likely include what circumstances you will have to forfeit the money. For example, you decide to back out of the deal without a reason covered in the purchase agreement. However, if the deal goes south due to the seller like refusing to make repairs found in the home inspection, you can get your deposit returned. If the deal goes through, the earnest money is applied to the down payment.

Once the seller reviews your offer they can decide to accept, counter or decline. If the offer is accepted, you will apply for a mortgage and being the process of closing. If the seller offers a counter, you can accept and being the closing process or you can choose to counter again. This will require a new offer letter.

If the seller refuses the offer, itâ€s time to move on to a new home. Good luck!

The post How To Make an Offer on A Home appeared first on Charlotte Real Estate.

Following decades of underbuilding and underinvestment, “the situation is dire,” the report states. The shortage of available homes that are affordable to our nationâ€s population is chronic. With a severe lack of new construction both thanks to expensive lumber and record numbers of people looking to adjust their way of life thanks to the pandemic, the housing stock around the country has been neglected.

“The scale of underbuilding and the existing demand-supply gap is enormous and will require a major national commitment to build more housing of all types by expanding resources, addressing barrier to new development and making new housing construction an integral part of a national infrastructure strategy,” said the report.

On average, the U.S. has built 267,000 fewer homes per year in the past 20 years compared to the years between 1968 to 2000. That about 5.5 million units short of the long-term historical levels, according to the NAR report. The report is calling for a “once-in-a-generation” policy response. To make up the shortage, NAR says the U.S. needs to build over 2 million homes every year for a decade. This would be more than the country built every year during the mid-2000s housing boom.

Data released last week by the federal governmentâ€s report on new residential construction, showed little progress toward mitigating the shortage. Between April and May, new permits for building fell 3%. Builders started on 3.6% more new homes than the month prior according to that report.

The shortage in supply isnâ€t limited to new homes. According to a report released by Harvard Universityâ€s Joint Center for Housing Studies, there are fewer existing homes up for sale too.

“Weâ€ll need to do something dramatic to close this gap,” said Lawrence Yun, NARâ€s chief economist. The realtor association proposed increasing the housing supply by creating tax credits or expanding those already in place. They also presented ideas of loans or grants for builders who renovate or build new housing in low-income areas. The same proposition would include builders who convert old malls and factories into homes. They also asked for incentives for cities to allow denser zoning. According to Reuters, this was something President Biden included in his infrastructure proposal.

You can read the full report from the National Association of Realtors here.

The post Housing Shortage Could Take a Decade to Fix appeared first on Charlotte Real Estate.

Itâ€s been no different for buying and selling homes across the country this past year. Restrictions and lockdowns forced agents to pivot by showing houses virtually but still the red-hot market continued to thrive.

Despite a recession, U.S. homeowners have gained $3.1 trillion in home value because of rising house prices. The total worth of homes across the country was up 10% in January at $32.4 trillion compared to $29.3 trillion a year earlier.

In January, the median home sale price was $330,500, up 14.3% from a year ago. This has been the biggest annual gain during a given month since 2013.

“Surging prices are helping local homeowners build equity, but also creating barriers to entry for many first-time buyers here in Albuquerque,” said Redfin New Mexico real estate agent Austin Wolff. “With so many affluent folks moving in from out of state, families who’ve been here for generations could get priced out. But beginner buyers shouldn’t give up. I’ve had clients win homes by using creative strategies that don’t require a huge down payment or the highest bid.”

There has been a record decline in inventory causing a massive housing shortage. There are many more buyers than there are sellers. This is the case every year, but the imbalance has intensified during the past year. Supply of home sales plummeted a record 23.6% year over year in January as many Americans relocated and purchased homes thanks to remote work and ultra-low mortgage rates. The inventory shortage has also caused skyrocketing home prices and fierce bidding wars.

“Inventory is so low that it has even been tough to get in to see homes at all,” said Redfin Cleveland real estate agent Danielle Parent. “It’s a very, very challenging market for buyers, so I’m telling my clients that they should always have second- and third-choice homes in mind and may want to consider making offers sight-unseen.”

Almost 63% of people who bought a home in the past year made an offer on a property sight-unseen compared to just 32% in 2019. This is the highest percentage since at least 2015. Some homebuyers felt buying a home without previously seeing the property was the safer option during the pandemic, while others choose this route because it allows them to submit a quicker and more competitive bid.

Nearly 25% of listings mention home offices in January compared to almost 23% a year earlier, a feature that has grown in popularity due to so many spending so much time at home. Properties with nice views have also gained popularity, 16.7% of listings. Other highlights include home listings that mention spas (17.2%), pools (13%) and lakes (5.7%)

To read the full report from Redfin complete with charts, click here.

The post One Year Later: How the Pandemic Impacted the U.S. Housing Market appeared first on Charlotte Real Estate.

The National Association of Realtors said its Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contact signing, decreased 1.1% to 128.9 in October. An index of 100 is equal to the level of contract activity in 2001.

Compared to a year ago, pending homes sales increased 20.2%. The two month decline in contracts suggests a slowdown in existing home sales after they increased in October to their highest level since November 2005.

“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” said Lawrence Yun, NAR’s chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”

The U.S. housing market is being driven by record low mortgage rates along with inventory of homes for sale. According to data from mortgage finance agency Freddie Mac, the 30-year fixed mortgage rate is around an average 2.72%

The combination of these factors – scarce housing and low rates – plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment,” said Yun. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”

The coronavirus pandemic has forced many from the city centers into suburbs as more Americans seek accommodations that are more spacious for remote work and virtual schooling. The covid-19 recession, which started in February, has also disproportionately affected lower-wage earners.

“We expect a resurging pandemic, faltering recovery, and depleted inventories to weigh on home sales, particularly if no additional fiscal stimulus is forthcoming,” said Nancy Vanden Houten, lead economist at Oxford Economics in New York.

Strong demands for housing has outpaced supply, boosting prices out of the reach of many first-time home buyers, despite builders ramping up construction. Builders have complained about shortages of land and materials.

“The manufacturing sector is continuing to recover but remains below pre-pandemic levels,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “The threat now comes from virus outbreaks that could interrupt activity, disrupt supply chains and weigh on demand.”

In October, pending home sales edged up 0.1% in the South. Contracts dropped 5.9% in the Northeast and fell 0.7% in the Midwest. The west saw no change.

The post Unexpected Dip in October U.S. Pending Home Sales appeared first on Charlotte Real Estate.

NARâ€s Pending Home Sales Index measures the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction. The PHSI fell 2.2% to 130.0 in September. An index of 100 is equal to the level of contract activity in 2001. 2001 was the first year examined.

“The demand for home buying remains super strong, even with a slight monthly pullback in September, and we’re still likely to end the year with more homes sold overall in 2020 than in 2019,” said Lawrence Yun, NAR’s chief economist. “With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”

“Additionally, a second-order demand will steadily arise as homeowners who had not considered moving before the pandemic begin to enter the market,” Yun said. “A number of these owners are contemplating moving into larger homes in less densely populated areas in light of new-found work-from-home flexibility.”

The report is the latest in findings that show the housing market cooled in September after showing being strong in the summer. Sales of existing homes fell as well according to NAR. The commerce Department said September sales of newly constructed homes also decreased. Despite the decline, contract signings climbed 20.5% compared to a year ago.

On a month-to-month basis in September, three of the four regional indices tracked by NAR recorded a decrease in contract activity. The Northeast was the only region to record month-over-month gains. The Northeast index grew to 119.4 in September. That is a growth of 2.0%, a 27.7% increase from September 2019. The PHSI in the South fell 3.0% to an index of 150.1 in September which is up 19.6% from September of last year. The index in the west slid 2.6% in September to 116.8 an increase of 19.3% from a year ago. The Midwest saw the index decrease 3.2% to 120.5 last month, up 18.5% when compared to a year ago. All four regions experienced double-digit year-over-year increases.

The next Pending Home Sales Index will be released by The National Association of Realtors on November 30.

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The report also revealed a growing strain in housing supply. The estimate of new homes for sale fell to 282,000 from 291,000. At the housing marketâ€s current rale of sale, there is a supply of 3.3 months. A 6-month supply is considered the benchmark for a balanced market.

The growing interest in newly-constructed homes largely stems from the lack of existing homes for sale. While existing-home sales have also increased at a fast pace, the inventory of homes left on the market is depleting. Despite this, some sellers have been reluctant to sell according to a report from Realtor.com. The article found that nearly 400,000 fewer homes have been listed for sales since the start of the pandemic compared to last year.

Through the coronavirus pandemic, the U.S. housing market has been one of the few industries to enjoy a V-shaped rebound. In March, the Federal Reserve lowered mortgage rates and spurred a pickup in home sales. The messaging from the central bank that rates would stay low for years, added fuel to the market rally. Some, however, fear that the sharp resurgence is on its last legs.

“While strong demand and lower mortgage rates are supportive of home sales, the slow recovery and weak labor market pose downside risks that we expect will weigh on home sales in the months ahead,” said Nancy Vanden Houten, a researcher at Oxford Economics.

Prices for homes could become a barrier for the real estate market. Low supply in combination with low interest rates and high demand has sent prices upward. Some buyers could eventually find themselves priced out of the market.
There are some other indications that have pointed to a lasting demand in the sector. Home-builder optimism reached an all-time high in September, according the National Association of Home Builders/Wells Fargo Housing Market Index. Throughout the summer, sales of existing homes have trended in line with new-unit purchases.

“Already, more new homes have sold in 2020 than did in all of 2019,” said Danielle Hale, chief economist at Realtor.com. “With the number of existing homes for sale down consistently and considerably from a year ago, new homes are an important segment of opportunity for home shoppers.”

The Census Bureauâ€s full release can be found here.

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House prices in the U.S. rose 5.4 percent from the second quarter of 2019 to the second quarter of 2020. This according to the Federal Housing Finance Agency House Price Index. In the second quarter of 2020, house prices were up 0.8 percent.

“Home prices grew by 5.4 percent in the second quarter of 2020 compared to a year ago, despite the impacts of COVID-19.” said Dr. Lynn Fisher, Deputy Director of the Division of Research and Statistics at FHFA. “Although house prices fell slightly in May relative to April, in June prices rebounded by 0.9 percent over the month as local economies re-opened and transactions picked up again. Four Census Divisions showed strong early summer gains with month over month growth of one percent or more in June.”

Some other significant findings from the report are that house prices have been on the rise since 2011. House prices rose in all 50 states and the District of Columbia between Q2 of 2019 and 2020. The house price in Honolulu, Hawaii rose 11.7% over the past year and rose 2 percent over the last quarter. The other metro areas rounding out the top five showing year over year growth are Boise, Idaho; Tacoma, Washington; Phoenix, Arizona and Greensboro, North Carolina. The Charlotte-Concord-Gastonia, North Carolina-South Carolina area house prices rose 7.7% over the past year and rose 1.2 % over the last quarter.

According to data released by Canopy Realtor Association, homes are selling faster. Houses in the Charlotte area on average go under contract in 36 days compared to 38 days in July of 2019. Homebuyers have fewer and more expensive options compared to last year. The data also shows that inventory is down almost 48% from last year. There were 5,580 homes that were up for sale last month compared to 10,629 in July of last year. By comparison, in April of this year, about a month into the coronavirus pandemic, there were 7,556 homes for sale. The market saw a sharp dip of available homes in June. There were 5,700 homes on the market.

While Charlotte may be more expensive to live in that other areas of North Carolina, like the Raleigh-Durham-Chapel Hill areas, the Queen city is much less expensive than other big cities like Washington, D.C. who had a record-breaking July.

Regardless of the metro area, the general trend stands– inventory is down, house prices are up.

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