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interest

Mortgage Rates Hit a 20-Year High of 6.92%

According to Freddie Mac, mortgage rates reached a 20-year high last week due to rising interest rates, now at a whopping 6.92%. The Federal Reserve is continuing its aggressive monetary policy to squash surging inflation, sending shockwaves throughout the housing market.

The federal funds rate is projected to reach 4.4% by the end of 2022. Russia’s invasion of Ukraine, supply chain issues and record low interest rates during the pandemic led to unprecedented inflation, prompting the Fed’s policy initiative.

While the Fed continues to wrangle with inflation, the housing market is especially feeling the pinch of higher interest rates. The S&P 500 and the New York Stock Exchange also fell 20% from this time last year as a result of these rate hikes. The declines have continued for several weeks.

Despite the Fed’s efforts, the consumer price index has not significantly budged. The index rose to 8.2% in September, far from the Fed’s eventual target of 2%.

For the last 15 years, mortgage rates in the U.S. have been relatively low. Thirty-year fixed mortgage rates were notably low during the previous two years, hovering between 2.5% and 3.5% between 2020 and early 2022.

However, mortgage rates spiked in recent weeks. As of Oct. 13, the thirty-year mortgage rate is at a two-decade high of 6.92%. The fifteen-year rate is at 6.09%.

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Freddie Mac’s chief economist Sam Khater released a statement regarding the rates.

“Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April 2002. We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market.”

The Fed has been clear about its plan to continue increasing the federal funds rate until prices begin to level out. Mortgage rates tend to rise alongside the federal funds rate.

In September, the chairman of the Fed, Jerome Powell, said there is no way to avoid the rising unemployment and slowing growth that will follow the Fed’s current monetary policy. The consequences of out-of-control interest rates may be even more disastrous for the economy than necessary rising interest rates. The Fed estimates unemployment will climb to 4.4% in 2023 and 2024, up from the current rate of 3.5%.

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

Some experts are taken aback by how quickly mortgage rates are rising. Economist Matthew Speakman from Zillow told ABC News that “few could have predicted exactly how far and how fast they have risen.”

“There’s not a lot of incentive for rates to come down dramatically in the near-term, but that doesn’t necessarily mean they’re going to keep running away at this pace.”

The relationship between homebuyer behavior and rising mortgage rates is complicated. In general, higher mortgage rates reduce demand, which drives down the prices of homes. Real estate prices are falling, but not as rapidly as expected, in the face of the skyrocketing mortgage rates.

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Daryl Fairweather, an economist at Redfin, spoke on the complexity of the current housing market.

“It’s like a standoff between buyers and sellers. Buyers can’t afford higher prices, and sellers don’t want to sell for lower prices.”

Recession worries, rising inflation and high-interest rates have made things appear bleak, but many experts believe mortgage rates will not continue to skyrocket. Lawrence Yun, the chief economist at the National Association of Realtors, predicts that rates will hover around the resistance point of 7%.

“We don’t want to see a bursting out of that second resistance and going up, because you’re talking about 8.5% mortgage rates, something that we clearly do not want to see. The 7% interest rate could be the new normal.”

In July, Yun released a statement predicting that higher mortgage rates will persist as long as the high inflation rate persists.

“If consumer price inflation continues to rise, then mortgage rates will move higher. Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”

house

US Home Prices Decline at Fastest Pace Since 2008 Financial Crisis

We are in the middle of the most significant two-month drop in home prices since shortly after the collapse of the Lehman Brothers in September 2008. Prices have been declining at the fastest pace since the Great Recession, prompting some experts to believe we are entering a housing market correction.

house

Homebuilder Sentiment Falls for Ninth Consecutive Month

U.S. homebuilder confidence in the housing market dropped to its lowest level since the beginning of the COVID-19 pandemic. Experts believe the high inflation rate and rising borrowing costs are contributing to first-time homebuyers’ hesitancy to purchase new single-family homes.

The National Association of Home Builders/ Wells Fargo Housing Market Index, which measures the activity of the single-family housing market, fell to 46 in September after declining for the ninth consecutive month. The last nine months are the most prolonged and persistent decline in builder sentiment in the last four decades.

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Experts say a Housing Market Index above 50 shows a healthy market with net positive growth. In November 2020, the index rose to 76, the highest in 35 years, due to the Federal Reserve pushing the federal funds rate to nearly zero. After the pandemic’s dampening effect, the Fed’s loosening of the federal funds rate was meant to stimulate the economy back to health.

Recently The Federal Reserve has been raising interest rates by adopting an aggressive monetary policy to bring the inflation rate back down to sustainable levels. A lack of supply due to construction costs fueled by those interest rates has slowed down building into a housing recession.

NAHB chairman Jerry Konter said builders are responding to a falling market by using incentives to bolster sales, “including mortgage rate buydowns, free amenities and price reductions.”

Pantheon Macroeconomics analyst Ian Shepherdson believes that builder sentiment will continue to decline.

 “This probably will not mark the bottom of the cycle, given the latest surge in mortgage rates above 6%. The rate of fall of mortgage applications slowed over the summer, but the early September numbers point to a renewed sharp decline.”

Mortgage rates have skyrocketed to those seen during the 2008 housing crisis, with interest rates on 30-year fixed loans hitting 6%. According to data released from the Mortgage Bankers Association, mortgage rates have already risen 4% so far this year.

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This increase in mortgage rates would add $389,000 in interest payments to the life of a $500,000 single-family home purchase. The association’s data also showed that the seasonally adjusted MBA Purchase Index rose only 0.2%. New applications for mortgages went down  1.2%.

Though builder sentiment often signals the eventual direction of mortgage applications, NAHB CEO Jerry Howard told Fox Business that people should have confidence that the housing market will pick back up again.

I think you’re seeing a weakening in virtually every market, but those that were stronger are weakening less. I guess the most important thing that investors and people need to remember is that Americans still want to own their homes and that, as soon as the conditions turn a little more favorable, housing will pick up. That will pick up the whole economy.”

flooding

$34B of US Real Estate May Be Fully or Partially Underwater by 2050

Rising waters due to climate change could engulf $34 billion in US real estate within the next 30 years.

According to a report from the nonprofit Climate Central, up to 650,000 properties will be underwater or partially below the tidal boundary level within 30 years. Thirty counties across the country will lose more than 10% of their useable land, and 100 counties will lose at least 2% of their usable land.

The states most affected will lose a sizable portion of their total dry landmass. These states include Louisiana (8%), Florida (1.8%), North Carolina (1.3%) and Texas (0.2%).

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Rising waters will likely make these locations less desirable to live and work in, causing property values to plummet. Property taxes are an integral part of a municipal’s budget. They pay for many community social services, including schools, fire protection, emergency services, transport and other governmental aids.

Taxes also fund disaster relief and the subsequent costs of rising sea levels. New infrastructure, building safeguards against rising tides and relocating entire communities cost money. The aftermath of a rise in waters will quickly deplete many localities of their necessary funding.

“Property taxes fund local government operations, which typically include services such as K-12 schooling, roads and other infrastructure, police and fire protection, water, waste management, sewers, public transit, parks and public housing. Quality public services at competitive tax rates are key to attracting and retaining residents and businesses, which in turn support local tax revenues. Diminished property values and a smaller tax base can lead to lower tax revenues and reduced public services–a potential downward spiral of disinvestment and population decline, reduced tax base and public services and so on.”

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Seas will rise 8 to 23 inches along the nation’s coasts by 2050. The East Coast, particularly the Southeast, will be hit the hardest. Due to the sediment that flows in from the Mississippi River and the drilling for oil and gas pipelines, the gulf coast will be hit even harder by rising water levels and sinking ground.

Mark Rupp, director of the adaptation program at Georgetown Climate Center, points out that insurance carriers are reluctant to serve the Florida market, have become insolvent or have pulled out from the state entirely.

“How many mortgage lenders want to be lending for mortgages in flood-prone areas if they don’t think they’re going to be paid back?”

Rupp emphasizes that it is essential that these communities can rely on their state and federal governments to pay attention, fund their communities and provide a plan.

According to NASA, the earth’s climate has changed at a rate unseen in the past 10,000 years. The current rate of global warming is “occurring roughly ten times faster than the average rate of warming after an ice age.” The carbon dioxide we release is “increasing about 250 times faster than it did from natural sources after the last Ice Age.”

appraisel

Black Couple Sues Real Estate Appraiser After Home Valuation Increases By $300,000 When Shown By White Colleague

A Maryland couple is suing a local real estate appraiser and an online mortgage provider after alleging that the housing appraisal they received was unfairly low due to their race, violating the Fair Housing Act.

best places to live

The Best Places To Live In America This Year 

Real Estate company Niche has released their fifth annual report of the Best Places to Live in America, which includes a number of different categories including the most affordable places in the nation to live. 

“The pandemic triggered a new set of possibilities—suddenly, many individuals and families found themselves more mobile than ever before, and in the past two years they have continued to think hard about where they really want to live,” says Luke Skurman, CEO and founder of Niche.

Niche creates their reports using data from reliable sources such as the US Census and other government agencies, in addition to citizen reviews and reports. When it comes time to put there report together, they look at factors such as affordability, diversity, local housing economies, and other integral factors that buyers would look at when it comes time to buy a home. 

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For the second year in a row, Niche reported that The Woodlands is the top place in America to live. Ryan Bell, the principal strategist at Niche, discussed why it’s been able to top the list two years in a row. 

“When you look at all the factors we chose for our best cities ranking, The Woodlands is extremely well-rounded. It had high scores in each category, including weather, overall affordability and the quality of its public schools.”

Niche’s best cities rankings also incorporate real ratings from people who live there, so the residents’ love and appreciation for their home certainly helped The Woodlands hang on to the number one spot for two years running,” says Bell.

Gil Staley, CEO of The Woodlands Area Economic Development Project, also spoke to the perks that The Woodlands has to offer leading to its top ranking on the list. 

“Our county, as a whole, is one of the fastest growing counties in the nation and our community has turned into a regional center for jobs,” Bell explained, adding that the highly ranked school districts in the county also make the Woodlands a desirable place to live. 

Niche listed Fort Wayne, Indiana as the most affordable place to live in the US, a title which it also earned in 2018, 2019, and 2021. 

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“To take the number one spot, Fort Wayne had to have strong performance in several factors we take into account for the lowest cost of living rankings. In particular, housing and rental affordability in comparison to incomes in the area, are Fort Wayne’s strongest factors for affordability this year,” says Bell. 

Forbes Magazine reported on why citizens in Fort Wayne also believe it’s such an amazing place to live: “Fort Wayne is a lovely place to visit and live. I’ve lived here for six years now and still haven’t seen everything. It’s family friendly and just friendly in general. It’s a small city compared to most, but there’s much to do. It’s full of history and rivers.”

The Top 10 Best Places to live in America according to Niche are ranked as follows: 

  1. The Woodlands, Texas
  2. Cambridge, Massachusetts
  3. Naperville, Illinois
  4. Arlington, Virginia
  5. Overland Park, Kansas
  6. Ann Arbor, Michigan
  7. Columbia, Maryland
  8. Berkeley, California
  9. Plano, Texas
  10. Irvine, California

For the rest of the rankings from Niche, check out their full report here.

sale

Real Estate Experts Say US Housing Market Is On Its Way To Recovery

Real estate industry economists are stating that the nation’s housing market is on a correction course with housing prices slowly moderating, and even declining, in some areas.

Mortgage

US Housing Market Is Slowing Down, Inventory Is High And Prices Are Lowering

The US housing market has been on quite the roller coaster ride since the beginning of the Covid-19 pandemic. Now, experts are saying that the housing market may not be crashing, but it’s definitely slowing down in terms of sales, mortgage rates, and inventory.

New Report Shows Keys To Maximizing Real Estate Earning Potential 

McKissock Learning has revealed a new guide of income statistics from licensed real estate professionals across the United States as a means of keeping track of trends, and highlighting the methods that are maximizing agents’ earning potential.

McKissock Learning is one of America’s top online real estate schools, and provides educational courses and professional development to hundreds of thousands of agents across the country every year. 

In November 2021, the company reached out to thousands of licensed real estate agents and brokers to gain a better understanding of the specific strategies used to increase their earning potential. 

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Last year, the number of agents that participated was about half of the 9,000 participants in this year’s report. This way, the guide can show a much more accurate picture of what real estate agents are earning and how they’re making it possible. 

Real estate income is actually on the rise, despite the many complications the industry has faced throughout the Covid-19 pandemic. 75% of real estate agents reported that they earned more in 2020 than they did in 2019, with an average income of $129,996 for full-time agents. 

Another trend that’s helping the market continue to thrive is the fact that more agents are happy with the brokerage they’re a part of. Choosing the right brokerage is an essential part of being a successful agent. 

84% of the agents surveyed stated that they were satisfied with their brokerage experience. Only 6% of participants said that they plan on switching brokerages within the next couple of years. 

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Specializing in a niche has also proven to be one of the keys to maximizing your earning potential. Last year’s report showed the same results, citing that agents who showed eco-friendly properties were able to gain an average income of $263,180. 

92% of the participants reported that they feel very optimistic about their future in real estate, which is the highest percentage in the history of McKissock Learning’s reports. 

Only 12% of agents said they planned on retiring within the next five years. Real estate allows agents to create their own schedules, to an extent, so it’s easier for certain agents to reduce the number of hours they work per week to best fit their lifestyle and income goals. 

The report stated that obviously a reduction in hours could result in a reduction of income for agents, however, individuals can still earn a decent income as a part-time or semi-retired agent.

2021 Housing Market Concludes With Price Growths, What To Expect In 2022

The winter housing market in the US started heating up again in December, potentially leading to a hot market in the first quarter of 2022. More buyers have become motivated to hop on real estate transactions due to looming mortgage rate increases as well. 

Listing prices in December returned to double-digits similar to what the market looked like during the spring/summer of 2021 when real estate was seeing some of its most competitive transactions since the start of the pandemic. 

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According to data from Realtor.com’s chief economist Danielle Hale, “December data offered a fitting finish to the frenzy of the past year. Annual listing price growth hit double-digits again nationwide and in many of the hottest markets, after four months of single-digit pace this fall.”

“Despite buyer challenges like rising prices, limited inventory and fast-paced sales, real estate activity maintained a brisk pace throughout 2021 as factors like low mortgage rates enabled home shoppers to persist. With rate hikes now on the horizon, buyers may be trying to get ahead of higher monthly housing costs, in turn driving up competition and prices,” Hale explained.

“Our 2022 forecast anticipates affordability challenges this year, but also that trends like rising incomes and workplace flexibility could offer some Americans a better shot at finding a home.”

“For those who weren’t successful in 2021, we expect better luck in the coming months as more sellers plan to enter the market – and if December’s listings are an indication, with high asking prices in mind,” she explained. 

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 In 2021 the demand for homes was much higher than the supply, which drove prices even higher and will likely continue to drive the prices up in 2022. Realtor.com is also predicting that these price increases will cause a lot of affordability issues in the new year. The average price for a home in the US is now 25% higher than it was in 2019.

Within the past two years the average price for a typical 2,000 square foot single-family home increased by 18.6% consecutively. More than 25% of the US’s largest markets saw double-digit home price gains in 2021. 

While the winter is typically a cooling off period for the market, the past two months have seen historically low listing times, as buyer activity continues to outmatch the limited inventory available throughout the nation. 

When compared to the national pace of the market, time on the market was lower in the US’s 50 largest metropolitans with an average of 48 days on the market, seven days less than last years average and 25 days less than 2019’s average. 

Inventory is expected to increase to ideally meet the demand of buyers in America. December data did show more new sellers entered the market when compared to last year’s numbers, a majority of these listings, however, are in cities.