Homebuyers Face Less Competition

From my perspective as a mortgage lender, anecdotal evidence shows there is less competition for those homes listed for sale now, relative to the last few years. Buyers now often offer contracts at or slightly below list price, whereas in 2021 and early 2022, buyers had to offer tens of thousands over list price to win the contract. I now see buyers winning some seller contributions to closing costs, and contracts often include reasonable finance and appraisal contingencies to protect the buyers.

But how much less competition is there, really? I found Redfin’s “Compete Score” on their website. This score measures how competitive an area is for home buyers. The Compete Score ranks geographic areas on a scale of 0 to 100, where 100 is the most competitive. Redfin calculates the score primarily using four key data points: number of days on market, sale to list ratio, number of competing offers, and waived contingencies. For the Atlanta area, Redfin separates the data further, into “Core City” and “Suburb” components. Let’s look at the data for each, starting with the Core City area.

In February 2020, the Core City area earned a 60 score. This dropped to 55 in 2021, then to 53 in 2022, and down to 52 in February 2023. So, the competitiveness of the Core City housing market has dropped each year, and by 13% over this three-year period.

In February 2020, the suburbs earned a 66 score. This increased to 67 in 2021, then jumped to 73 in February 2022. The Compete Score has dropped all the way back to 57 in February 2023. This is a 14% drop from 2020 and a surprising 22% drop in the last year.

We are left to figure out “whys” behind the data. Why is the Compete Score consistently higher in the suburbs? My first thought is Covid-19. With the 2020 pandemic, more people wanted homes with more yards, more rooms / square footage, etc. Housing is less dense in the suburbs, so it makes sense that more people would want to buy homes in the burbs, thus increasing competition there. Other factors could be the construction of more Core City rental units, making the supply lower and pushing more buyers to the suburbs. Differences in home prices in the Core City vs. suburbs areas could also play a role.

A much easier question is “Why have the Compete Scores dropped in the last year?” The quick answer is mortgage interest rates. Home prices rose significantly in the last few years, and yet people were buying homes as fast as they went on the market. The downward trend of home purchases and those applying for pre-approvals began when mortgage rates jumped. And, wow, have mortgage rates jumped in the last 14 months. These higher interest rates have caused many people to put their home purchase plans on hold, which is driving the lower competition for homes.

That means less competition for those who can and still want to buy a home. And now we can measure that drop in competition. In both Core City and Suburb areas, competition has dropped significantly, in general, in the last 12 months. The drop has been more significant in the Suburbs, but there is still greater competition for homes in the Suburbs than in the Core City areas.

Looking to buy a home in Georgia? Now is a great time to buy – read this post to better understand why. It’s still a seller’s market, though. If you want a lender who has tools to help you win the contract, give me a call, and let’s get you ready to make the most competitive offer possible.

Housing Inventory Rises

A recent report by the real estate firm Redfin shows that the national inventory of homes for sale increased by about 2% as compared to June 2021. June 2022 represents the first month of a year over year home inventory increase since July 2019 – that’s almost 3 years!

The report indicates that the inventory increase resulted from a combination of increasing home prices, rising mortgage interest rates, and a slowing economy. While the national home-sale price increased 11.2% in June, that marks the lowest annual increase in almost two years. June’s home sales decreased by 15.5% year over year, representing the largest decline since May 2020.

While home prices and interest rates have risen dramatically, current homebuyers now face reduced competition and a market that is becoming more balanced, as compared to the strong sellers’ market of the last few years. The reduced competition can help homebuyers make less risky offers by including longer due diligence periods and appraisal contingencies.

Other key national statistics from Redfin’s June report include:

• Pending home sales declined 12.6% year over year.
• New home listings decreased 4.4% relative to June 2021.
• Months of available housing supply increased from 0.5 to 1.7 months.
• Percent of homes selling above list price decreased about 1% from June 2021. But the percentage of homes selling above list price was still 55.5%.

In addition to decreased competition, homebuyers have experienced a decrease of mortgage interest rates in recent weeks. I have noticed rates drop by more than one-half of one percent for some well-qualified buyers relative to just a few weeks ago.

Given this information, I think now is a great time to search for homes. Homebuyers can take advantage of the recent dip in interest rates combined with the confidence of making less risky offers now. The stress of competing by skipping home inspections, appraisal contingencies, and offering tens of thousands of dollars over list prices appears to be fading a bit now.

If you want to buy a home in the State of Georgia, the benefit of starting the process now is looking better and better. Give me a call and we can evaluate your situation and loan options, and lay out a plan for you to buy your dream home now while the market is improving.

Buyers work desires shifting

A recent survey by Conference Board finds over 80% of workers are not only ready but comfortable returning to the office. One of the reasons is remote work – for some – isn’t what it is cracked up to be.

It seems while remote work provides a desirable work-life balance for some, these results indicate the lack of clear boundaries in many remote-work arrangements can fuel stress and burnout. The survey showed:

• 47% are worried about blurred work-life boundaries.
• 34% said they care about the constant expectation to be available.
• 32% are anxious about increased hours or workload.

Combine these numbers with high gas prices, and we are seeing buyers looking for homes closer to work.

The market shift has made life a little easier for buyers. Now mortgage rates are moving lower increasing buying power. For those who put off buying a home due to the intense seller’s market – and there were many who did – now is the time to take another looking a buying your next home. If you are buying a home in the state of Georgia, contact me today to get started!

Buyers getting discouraged

It’s been a seller’s market for many years now. It started as early as 2018 in some purchase price point areas – mainly first time home buyer price points back in 2018. It soon spread throughout the market, and became just as an extreme of a seller’s market as it was a buyer’s market during the housing crash well over a decade ago.

I can understand why buyers are frustrated and discouraged:

• The easy one, I see it every day with my job and talking to buyers.
• Home values continue to increase and are up by 7% (or more) year to date in some markets.
• Mortgage rates are on the rise and have risen above 5% for the first time in many, many years.
• Home affordability is close to an all time low. Combine the rising home values from the past few years with interest rates at 5%, and we’ve almost past the all time level for worst home affordability set in 2006.

While there are many things to be discouraged over, there are some positive signs:

• As of this post, mortgage rates have calmed down. Rates shot up in Feb/Mar/Apr to their current highs. While rates are definitely higher now than at the start of the year, they have – for now – got into a steadier range.
• Homes are now sitting longer on the market, and we are seeing more and more price reductions on listed homes.
• The last several contracts my clients won included a sufficient amount of days for due diligence, the appraisal contingency and financing contingency.
• Most importantly, more inventory is on the way from two sources:
  • A Realtor.com survey found 64% of respondents looking to sell their home by the end of the summer. Pandemic related delays are coming to an end, and people are going ahead with plans to move.
  • Forbearance programs are over. Homeowners have a lot of equity in their homes so expect people to look to sell a home they can’t afford to gain the equity out of it rather than allowing the home to go into foreclosure. This isn’t 2008!

It is still a seller’s market, yet signs show the market beginning to balance. I’ve been telling my clients to hang in there as signs are pointing to things easing up for buyers looking for their new home!

Potential Help for Home Buyers?

The housing market remains very skewed in the seller’s favor, with a very limited supply of homes and continued robust demand from home buyers. Everyone now hears stories of what seemed like a great offer on a for sale home that lost out to what seemed to be a crazy offer. I had clients who recently offered $40,000 over list price, but they were out bid by someone who paid $110,000 over the list price. Is there any hope for homebuyers?

A recent Wall Street Journal article noted an economic detail that could help with the housing supply. Many home sellers are trying to time the market, to sell their homes for the maximum possible price. And the recent rapid increase in mortgage rates is causing some to fear missing the home price peak, as higher rates price some buyers out of the market. The article reports that Realtors and financial advisors are now being contacted by homeowners seeking advice on how to best time the market and ease their fears over missing out on the maximum home sales price.

Economic theory says that higher mortgage rates should weaken housing demand, but that market reaction has not yet happened. With the supply of for-sale homes still limited, prices have continued their rapid increases in recent weeks. But sellers are now considering listing soon and not waiting any longer. Sellers are finding some motivation in statements like this one from the Federal Reserve Bank of Dallas, “there’s growing concern that U.S. house prices are again becoming unhinged from fundamentals.”

February purchase mortgage applications declined by 8.48% as compared to last year. Some leading economists see this as a sign of easing home buyer demand, which could dampen the rate of home price appreciation.

Realtors in high-cost areas are noting a sense of urgency to sell for those who want to relocate to less-expensive locations. In many cases now, sellers are rushing to get their homes on the market but requiring rent-back contract provisions, to give themselves more time to locate their new home. And some are just analyzing the local market. One vacation home seller was getting concerned about rising mortgage rates, until she realized that many buyers in her home’s area are paying cash.

Are you looking to buy a home in Georgia but concerned about buying a new home before you sell your current home? If so, I might be able to help. Many homebuyers can carry two mortgages with their incomes, and there are other asset-based loan programs that may help you qualify for a Georgia purchase before you sell your current home. Give me a call and we can review your options to determine your best approach to this market.

Fewer bidding wars

There is a drop in the number of homes receiving multiple offers. Redfin reported 60.3% of home offers written by Redfin agents faced competition, unchanged from September but down from a pandemic peak of 74.5% in April.

The numbers declined further as we entered the winter season. I’ve had clients go under contract on homes which had been sitting on the market for a month or more with no other offers being made.

One thing to keep in mind is Redfin’s report is nationwide. In local areas, it could be very different from one city to another. For example, I would expect the metro Atlanta market to be on the higher end of the trend with competitive situations – just not as bad as 2021.

Redfin also reported home prices hit a record-high $359,975 in the four-week period ending November 21, up 14% year over year. The unseasonable surge in home prices appears to be drawing in more sellers, as the number of homes listed for sale was down less than 3% from 2020, and up 11% from 2019. “Rising rents and rising prices on everything from gas to groceries may be motivating more people to buy homes now,” according to Redfin Chief Economist Daryl Fairweather. “Buying a home is a type of hedge against inflation, especially with mortgage rates still near historic lows.”

In a competitive market, now is a good time to get ready to purchase a home. If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.

Winter housing market remains hot

Expect this winter to be hot for the housing market. There may not be a jump at the Spring housing market in 2022 as the Spring market could be starting now!

“Compared to other past winter seasons, this winter season’s sales activity will be stronger,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “This winter, there will be more sales compared to pre-pandemic winters going back all the way to 2006.”

While there are fewer buyers out during the winter versus spring/summer, the momentum from 2021 will continue through the winter months and into the spring season. All of the activity will keep housing inventories tight!

It is imperative to work with a lender who can have you prepared to buy regardless of the season. If you are looking to purchase in the state of Georgia, contact me today! You can be prequalified in minutes and start on your way to a pre-underwritten file making your offers competitive is this continuing competitive market.

Inventory levels improving

It is still a seller’s market, and we are not approaching a balanced market yet. The good news is inventory levels are a little higher and could continue to improve.

In my previous post, I discussed how we will likely not see a jump in foreclosures due to those coming out of pandemic related forbearance programs. Instead, might we see an increase in inventory levels? An analysis by Zillow seems to indicate we will.

• Zillow believes around 850,000 homeowners will come out of forbearance this fall
• Over the past 12 months, their study showed about 25% of those coming out of forbearance listed their home for sale.
• the increase could be about 0.5 months of additional inventory (a 15% increase)
• this computes to over 200,000 homes nationwide

While an extra half month of inventory does not seem significant, in this extreme seller’s market, every bit helps!

Also, unlike 2008 when financial conditions and a souring housing market pushed many homeowners into involuntary foreclosure, strong equity growth and a robust sellers’ market are likely to ensure that even distressed homeowners have more options. Again, pointing towards people listing their homes for sale (versus foreclosure).

Those of you out there looking for a home… more inventory is on the way!

The extreme seller’s market continues. If you are looking for a home loan in Georgia, contact me today. I can get you prequalified in minutes, pre-approved as soon as I can review your income/assets, and even a pre-underwritten approval in a few days.

Will we see more foreclosures?

Mortgage forbearance programs are coming to an end. Many homeowners who were able to hold off on mortgage payments will now be required to start making them again – even if their personal economic situation has not improved from the fallout from Covid-19.

Should we expect to see an increase in foreclosures like we did over a decade ago? Experts do not expect a large increase in foreclosures, and feel the concern over a foreclosure spike is wildly overestimated.

Why? Equity and inventory.

• Housing Crisis: homeowners had no equity due to loan programs offering no money down (some allowed a loan to value over 100%), home values plummeted, so many were underwater on their homes, and there were not many people out looking to purchase a home.
• Today: if you read The Mortgage Blog (or the news), you know we are seeing historic lows on inventory levels. Because of this supply-and-demand cycle, home values jumped over the past two years. There are more than enough people out there willing to buy a home.

The dynamics are completely different this time around. While many people walked away from underwater properties during the housing crisis, many home owners have tens of thousands of dollars in equity now. They will not just walk away from that kind of money. Expect more homes to become available to purchase instead of going into foreclosure.

It is still a competitive market out there. If you are looking for a home loan in Georgia, contact me today. I can get you prequalified in minutes, pre-approved as soon as I can review your income/assets, and even a pre-underwritten approval in a few days.

Will home values drop?

Will home values drop? Many, many people want to know as the housing market is a major economic indicator for the U.S. If a recent survey conducted by the National Association of Realtors (NAR) is true, we may not experience much of a decline in values.

While home buyers hope values will reduce given the Covid-19 situation, the NAR survey seems to indicate values will hold steady for a few reasons:

• available homes for sale are lower than normal due to the pandemic impact on the market. A lower supply of homes will mitigate a dramatic drop of home values.
• NAR expects the normal Spring market activity will shift to later in 2020 as the country/economy/our lives/etc. shift back toward “normal.”
• with forbearance and most people who filed for unemployment benefits in the “furlough” and not “laid off” category, there is not the concern over high numbers of foreclosures.

So far sellers are holding firm to their list prices with roughly 70% saying they have not lowered prices to attract buyers. About 60% of sellers in the survey admit Covid is only delaying them selling their home this year at their originally intended list price.

In the same survey, about 60% of buyers felt home values would drop due to less competition of people out looking to purchase homes. While the demand for those looking may be down, the supply of homes is also down. As I mentioned earlier in this post, the lack of available homes may mitigate any drop of home values.

What should a buyer do? This is a national survey, so let me address more of the local market.

My advice to buyers is always this… if you find the home meeting your needs, go ahead and make an offer on the home. You cannot always count on the next home being there, or hoping values drop, or hoping mortgage rates stay low. If the home is the right one, go for it!

Buyers are heading back out into the market place. Over the past two weeks, I’ve had several clients go under contract to purchase their new home. The homes under contract went for near, at, or more than the list price. Some of my clients were involved in multiple offer situations.

In other words, in metro Atlanta, it appears recently listed home values are holding and buyers are headed back out into the market. I had one agent tell me there is one home for every three buyers in the metro Atlanta market. If the statement is true, it is still a seller’s market and home values may not come crashing down as some hope (at least not in the near term).

Looking to get out into the delayed Spring market? The housing market is coming back to life! If you are buying in the state of Georgia, contact me today! We can get you prequalified in a few minutes, and you’ll be ready to purchase your new home!