Tag: statistics

After an intensely competitive market, things are finally starting to slow down, with pending sales dropping by 12% nationwide since May. We’re not quite sure if that’s good or bad, though. Part of it can be attributed to seasonal variation — the market does start to slow heading into Q4 — but it never slows this much. It’s unclear whether the steep dropoff is because the market was already incredibly hot, or because buyer demand has lost its momentum. Either way, 2021 was decidedly not a normal year for the real estate market.

And it will continue to not be a normal year. Foreclosure moratoriums have ended, but people are still protected from evictions until September 30th. After that, expect a huge increase in supply as a result of distressed or forced sales. The good news is that rising supply will prompt decreasing prices. But demand is already decreasing, and we aren’t sure yet if it’s going to continue to decrease. People are going to be forced to sell, but may not be able to find buyers. Experts expect that demand will still be high enough in California to soften the blow, and we shouldn’t see prices plummet too far until 2023.

Photo by Markus Winkler on Unsplash

More: https://journal.firsttuesday.us/pending-sales-decline-prices-are-next/79156/

While it may seem like it was pandemic restrictions that forced the US further into the digital era, most people are actually not uncomfortable with it at all. In a recent survey, 81% of respondents trust online transactions. They don’t necessarily trust all online transactions, though, and they disagree on what exactly makes a transaction feel safe to them.

Predictably, some of the older generations aren’t aware of all the options available to them, such as online notorization services. Perhaps not so predictably, the older generations are actually the most likely to feel safe with digital forms of security. These include two-factor authentication (53% of older respondents), security questions (61%), and PINs (49%). The younger generations, on the other hand, would rather talk to an actual person (53% of younger respondents), even if the discussion is held remotely by phone or online, and don’t want to go through too many online steps to make a transaction go through (22%).

Photo by FLY:D ?Art Photographer on Unsplash

More: https://www.notarize.com/blog/notarize-survey

We’ve mentioned a few times that people now working from home more often have been making purchases to make their home more comfortable to live in. This doesn’t merely extend to smart technology, entertainment centers, or upgraded appliances, though. Home renovation projects increased by 25% in the first half of 2021.

36% of people renovating are trying to make better use of the space their have by remodelling rooms, including basements and attics. In many cases, this is probably to create a home office space. 12% have decided they want an entirely new room and are building an addition. 17% are aiming more for the comfort and entertainment aspect, and have opted to add a pool or hot tub. Such renovations are likely for personal reasons as a response to the work-from-home model, but they will also add value to the home later down the road.

Photo by Anna Demianenko on Unsplash

More: https://www.prnewswire.com/news-releases/selective-study-finds-25-increase-in-major-home-renovation-projects-in-first-half-of-2021-compared-to-end-of-2020-301347507.html

In San Francisco and surrounding areas, wage growth has recently outpaced home price growth. Some real estate analysts are now calling the area “affordable,” since prices are dropping relative to wage growth. That label discounts a few rather important factors, though.

First, the majority of wage growth in the area was for high income jobs. These people were already homeowners with stable, high-paying careers. Wage growth doesn’t actually help them purchase a home, it just gives them more disposable income — which they aren’t necessarily lacking.

Second, only in San Francisco itself are home prices actually dropping. In the rest of the region, they’re still going up. And throughout the entire region, they remain exorbitantly high. The Bay Area is one of the most expensive regions in the world.

Third, wages actually may not have gone up at all overall when factoring in unemployment. Unemployed people aren’t considered to have an average wage of $0.00. They’re just not counted in the data. Therefore, the unemployment rate doubling to 5.45% in May from pre-pandemic numbers may have caused average wages to become artificially inflated. Not to mention that no home is actually affordable to unemployed people.

Photo by Artem Beliaikin on Unsplash

More: https://www.mercurynews.com/2021/07/24/have-bay-area-homes-become-more-affordable/

While homes are selling quickly in the current market, the vast majority of those are existing homes. Construction has been slow for quite some time, and is weakened by high lumber prices. Though lumber prices are below their peak in May, wildfires are still hampering the ability to procure lumber. With so few homes being built, sales of new homes hit a 14 month low in June.

This is a problem not only for construction companies, but for the economy as a whole. Without many homes being built, supply is significantly lagging behind the already high demand. What’s more, many existing homes are not in the category of affordable housing, meaning low-income homebuyers are struggling to find something within their budget, especially with prices being high right now.

Photo by Randy Fath on Unsplash

More: https://finance.yahoo.com/news/u-home-sales-fall-sharply-141839957.html

Properties selling above the asking price isn’t a new concept. It happens regularly if a property is in high demand or demand is just high in general. However, it doesn’t normally happen with condos, which are usually an option for people who are on a low budget. This year, the number of condos sold, percent of condos sold over asking price, the sale price, and the average price over asking all skyrocketed. The trend began in May, and June saw record numbers across the board.

In a climate of high demand and low mortgage rates, like the current real estate market, properties are selling fast. Very fast. The median days on market for condos halved in the past year. The reason it’s condos specifically is that prices are also high, which means many people are looking for a budget option. They still need to stretch their budget, though, since heavy competition means they’re probably not going to strike a deal without offering over asking price or paying cash.

Photo by Andrea Davis on Unsplash

See the following link for statistics: https://www.redfin.com/news/condo-comeback-selling-above-asking-price/

The recent strong shift away from urban centers and towards more rural areas is thought to be a direct response to the increased popularity of the work-from-home model, brought on by the pandemic lockdowns. However, even though this is certainly a factor in the urban exodus, it’s not a new phenomenon. As early as 2010, people were starting to move away from urban areas towards suburban and rural areas. Being able to work from home simply accelerated the existing trend.

Why does the trend exist, though? Well, the statistics alone can’t give us a a certain answer, but we can speculate. It’s possible to conclude that people are liking the idea of living in a rural area. But that’s not necessarily the case. It’s important to note that the data holds true exclusively for mortgaged home purchases. This means that people who have excess cash lying around aren’t at all interested in rural living. In effect, this means that, quite possibly, no one is. Rural areas are generally less desirable, and because of this, are also generally cheaper. Buyers who need to take out a mortgage are looking within their budget, not necessarily for their dream home in their dream destination.

Photo by Timothy Eberly on Unsplash

More: https://journal.firsttuesday.us/mortgaged-homebuyers-prefer-rural-setting-to-city-life/78562/

Due to prices rising at a rate far exceeding wage growth, many believe that most of those in younger generations — Millennials and Gen Z — will probably never be able to afford homeownership and will be renting forever. While this is certainly true of some of them, some young adults are hoping to disprove this. The pandemic came with a lot of job losses, but for those who were able to retain their positions, their decreased spending during lockdowns meant increased savings.

And many of them are using their savings very smartly — as a down payment on a home. In a 1200 person survey of young adults, 83% said they had increased their savings during the pandemic. 59% of those with extra cash intend to put some of it towards a down payment. 64% plan to spend it on everyday expenses. The total is greater than 100% because some percentage of them plan to do both.

Young adults don’t necessarily know how to purchase a home, though, especially since many of them are first-time homebuyers. The survey also asked how respondents are making their decisions and who has influenced those decisions. The biggest factor was parents, with 71% asking their parents for advice. 61% asked friends and half asked their siblings. Over a quarter stretched further for help, asking grandparents or even taking advice from celebrities.

Photo by Konstantin Evdokimov on Unsplash

More: https://realtybiznews.com/armed-with-savings-from-the-pandemic-young-adults-eye-homeownership/98763138/

The Latinx population has long suffered and continues to suffer discrimination in the real estate industry, from the general population and industry professionals alike. Deep-seated systemic injustices also play a major role, with Latinx households frequently having lower income and lower credit scores. Now, in a hot market, they’re also facing heavy competition.

Despite these hardships, they actually account for over half of homeownership growth in the past decade, and the number is expected to reach 70% for the period from 2020 to 2040. After the 2008 financial crisis, the Latinx population took a huge hit, but now it has rebounded. What’s causing the scales to tip in favor of Latinx populations? We could say it’s their stereotypical strong work ethic, but experts point to their age. The average age of the Latinx population in the US is 29 years, 14 years below the national average. This places them squarely in the prime age for first-time homebuyers, which are currently a large segment of homebuyers.

Photo by National Cancer Institute on Unsplash

More: https://www.nbcnews.com/news/latino/future-home-ownership-latino-rcna1280

California was once a dream destination in the US, and probably still is for some people unable to afford it. But as for the people already living here, they’re leaving at a higher rate than people are coming in. What’s happening? Is California simply not living up to its expectations? What about the state do people not like?

There’s a theory that it’s California’s high tax rates that are pushing people out to nearby states such as Texas, Washington, and Arizona. But this is a misconception — it’s not that people don’t want to live in California, it’s that they can’t. The median home price in California has increased by 300% since the 1970s, even adjusting for inflation. Meanwhile, incomes have increased only 33% in the same time period. People who have been living here happily for years or even decades can no longer afford to do so, and are moving to less expensive states. California desperately needs more affordable housing or a wage overhaul if it wants to reverse its negative domestic migration numbers.

Photo by Claudia Altamimi on Unsplash

More: https://journal.firsttuesday.us/californias-problem-isnt-taxes-its-housing/78336/

One of the ways lenders try to make sure mortgage applicants are good on their loans is by looking for a down payment. A down payment tells lenders that the applicant does currently have money, and is therefore probably capable of saving some portion of their income. But that starts to fall apart when the money isn’t theirs — if the down payment was gifted to the buyer, generally by their parents, the buyer doesn’t necessarily have any skin in the game. They may be more likely to default on their loan.

Homeownership is a struggle, especially in California where home prices are exorbitantly high. In many cases, first time homebuyers actually do need a little bit of help to get started. The Consumer Protection Finance Bureau (CPFB) has data available for the years 2009 to 2016, which states that 31% of homebuyers aged 25-44 received a down payment gift. Unfortunately, not all homebuyers are able to get one. Black households in particular are often lower income, and the parents don’t have excess savings to give to their children. Given how frequent gifting is, this is a considerable blow to Black homeownership. While down payment gifts may seem like a necessary evil to overcome low homeownership rates, in the end they primarily boost white homeownership, exacerbating racial inequality, and are also only temporary boosts, since they result in more foreclosures.

Photo by Kate Hliznitsova on Unsplash

More: https://journal.firsttuesday.us/down-payment-gifts-and-the-bank-of-mom-and-dad/78189/

We’re all aware of racial disparities when it comes to homeownership, even if we don’t all know the extent of the disparity. What may come as a surprise is that the issue even extends to refinancing for those Black and Latinx households that do already own a home. Surely Black and Latinx households can benefit from refis just as much as white households — so why don’t they? The increasing volume of refis this year, due to lower interest rates, could shed some light on the issue.

Two of the major reasons are actually readily observable. Because Black and Latinx households are usually lower income, they also tend to have lower credit scores and higher loan-to-value ratios. Both of these pose risks to lenders, which causes lenders to quote higher interest rates. These combined probably account for about 80% of the disparity. Possible reasons for the remaining 20% include lower education, lower financial literacy, less employment stability, and weaker social networks. All of these are, in fact, underpinned by systemic inequality. While changes in the mortgage and lending industry can help to address the disparity, the long-standing effects of systemic inequality will dampen any such efforts.

Photo by Rajiv Perera on Unsplash

More: https://journal.firsttuesday.us/refinancing-and-race-why-the-divide-and-how-to-close-the-gap/78057/

Data from 2021’s Quarter 1 Housing Affordability Index is now available, and while the numbers haven’t changed much from last quarter, the continuing downward trend is apparent. Affordability is equal to or slightly lower than the Q4 2020 numbers in all major categories, including overall US affordability.

Only seven counties experienced an increase in affordability: Kings, Merced, Butte, Plumas, Siskiyou, Tehama, and Humboldt. The already lowest affordability rating of Mono County took an enormous nosedive, dropping from 11 to 3. Lassen County remains the most affordable county at 62, despite being down from 67, but the top spot may be up for grabs as Kings County went up one point to 58.

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More: https://www.car.org/marketdata/data/haitraditional

The Mortgage Credit Availability Index (MCAI) is a measurement of how easy it is to acquire a mortgage tax credit, which allows buyers with lower incomes to acquire mortgages without worrying so much about the tax payments. The MCAI went up by 0.6% in April, indicating loosening standards for getting a mortgage credit. First-time homebuyers, presently a large homebuying cohort, are especially helped by this since they often have lower incomes, lower credit scores, and outstanding debt.

This move is not without risks, though. One of the differences between the current recession and the recession of 2007 is that our lending standards are tighter now. Tighter lending standards are part of what helped the real estate industry avoid the brunt of the current recession. However, first-time homebuyers are seeing far more competition than they would have ever expected. In many cases they’re losing out to more established buyers with better credit or higher incomes. Loosening standards is a risk, but it may pay off if we can help lower income homebuyers get their foot in the door.

Photo by Tekton on Unsplash

More: https://www.housingwire.com/articles/looser-mortgage-credit-may-give-first-time-buyers-a-chance/

Real estate has consistently been considered a strong long-term investment, stronger than either stocks or gold, which take the second and third spot. In the current economic climate, real estate is continuing to prove itself a highly resilient industry, able to bounce back from a recession and become highly active and competitive even while the recession is still going on. The confidence in real estate as the best long-term investment is now the highest it has ever been in Gallup’s 11 years of reporting the statistic, at 41%. Stocks are now a long way behind at only 26%. Just a year ago, the confidence in real estate was 35%.

Photo by Adeolu Eletu on Unsplash

More: https://www.simplifyingthemarket.com/en/2021/05/18/americans-see-real-estate-as-a-better-investment-than-stocks-or-gold/