As Skittish Investors Back Off, First-Time Buyers Step In

May 28, 2020
RE investors base a purchase price on future expectations, but the pandemic created market confusion. As a result, first-timers face less competition for starter homes.

CHICAGO – The mix of homebuyers has been shifting since the pandemic began: Investor numbers are shrinking, as the number of first-time homebuyers is on the rise. First-timers don’t have to sell one home before purchasing another, and many have a newly boosted appreciation for homeownership after weeks of isolation.

In April 2020, the share of first-time buyers rose to 36%, a year-to-year increase from 32%, according to the National Association of Realtors®’ April 2020 Realtors Confidence Index Survey.

“Homebuyers are facing less competition from investors, and they are also benefiting from low mortgage rates,” says Scholastica “Gay” Cororaton, a, NAR researcher on the Economists’ Outlook blog. With fewer investors, cash sales dropped to 15% of existing-home sales in April, down from 20% a year earlier.

Record low mortgage rates also entice some first-time buyers. The estimated monthly mortgage payment on a home purchased at the median price of $286,800 with a 10% down payment on a 30-year fixed-rate mortgage was $1,131 – $90 less than the median rent of $1,041 in the first quarter of 2020.

Meanwhile, as first-time buyers increase in the marketplace, investors retreat. Those who plan to rent out a home to fix up and rent may perceive greater financial risk associated with renters due to the COVID-19 pandemic. Cororaton thinks investors are unlikely to purchase single-family properties at the rate they did during the Great Recession, which had sparked a wave of discounted foreclosures.

“In the current health and economic crisis, properties are not being foreclosed,” Cororaton notes. Also, so far, home prices are standing firm.

Source: “5 Housing Market Trends as Of April 2020,” National Association of REALTORS® Economists’ Outlook blog (May 22, 2020)

© Copyright 2020 INFORMATION INC., Bethesda, MD


New-home sales rise as Americans freed from lockdowns go house-hunting

May 27, 2020

Demand is being boosted by mortgage rates near record lows, says NAHB’s chief economist

New-home sales rose in April as Americans went on a buying spree as soon as state lockdowns were lifted.

Builders sold 623,000 houses at an annualized and seasonally adjusted pace, a gain of 0.6% from the revised March rate of 619,000, the Commerce Department said Tuesday in a report that records signed contracts as sales. Economists had expected sales would drop for a third consecutive month in April because of the economic shock caused by the COVID-19 pandemic.

“I was among the group expecting to see a decline in sales, but instead we’re seeing the stabilization of the housing market in April,” said Robert Dietz, chief economist for the National Association of Home Builders. “March may have been the low point.”

New-home sales are being boosted by mortgage rates near the lowest levels ever recorded, said Dietz. It’s helping to overcome “headwinds” such as a spike in the jobless rate and a tightening in requirements to get a mortgage, he said.

“Housing demand is responding to the low interest rates,” Dietz said. “There’s a pent-up demand as states begin to reopen, and it’s showing us that housing really is going to be a sector that helps to lead the economy into recovery mode.”

Three of four U.S. regions posted gains in April, compared to March, led by an 8.7% increase in the Northeast and gains of 2.4% in the South and Midwest. The West region that includes California, the nation’s most populous state, dropped 6.3%, the report said.

The average U.S. rate for a 30-year fixed mortgage fell to 3.24% last week, within one basis point of an all-time low set two weeks earlier, according to Freddie Mac.

The Federal Reserve began buying mortgage-backed securities in mid-March to keep credit flowing amid the economic jolt caused by the pandemic, which boosted competition for the bonds and put downward pressure on rates.

The average 30-year fixed rate probably will continue dropping through the rest of 2020, Fannie Mae said in a forecast earlier this month. It likely will average 3.2% in the current quarter, 3.1% in the third quarter, and 3% in the final three months of the year, Fannie Mae said.

 

Call Imagination Realty (Kathleen Carlson, Owner/Broker)  to start your search!            321-939-1300


Forbes lists top investment cities – 7 are in Fla.

February 5, 2016

NEW YORK – Feb. 3, 2016 – Where should real estate investors put their money in 2016? Forbes teamed up with North Carolina-based data company Local Market Monitor to produce its list of 2016 Best Buy Cities – the top 20 housing markets to invest in this year – and Florida dominates the list.

According to Forbes, Florida offers good values “where investors get the best bang for their housing buck, and where aspiring homeowners have the best prospects of making an economically sound purchase.”

Orlando took second place and was followed by six other Sunshine State cities. Among them, average home prices are highest in West Palm Beach (No. 19) at $285,000 and lowest in Tampa (No. 14) at $193,000. The averages, though, have been accelerating at a rate of 9 percent to 14 percent in all the Florida cities.

Florida’s domination of the list makes a lot of sense in light of the national economic recovery, says Ingo Winzer, founder and president of Local Market Monitor. “Since the national economy has stabilized and is growing again, the factors that prompt people to go to Florida have recovered,” he reasons.

“Best-buy” markets for 2016 housing

1. Grand Rapids

2. Orlando, Florida

3. San Antonio, Texas

4. Charlotte, North Carolina

5. Salt Lake City

6. Dallas

7. Austin, Texas

8. Fort Lauderdale, Florida

9. Seattle

10. Cape Coral, Florida

11. Indianapolis

12. North Port, Florida

13. Nashville, Tennessee

14. Tampa, Florida

15. Charleston, South Carolina

16. Denver, Colorado

17. Madison, Wisconsin

18. Jacksonville, Florida

19. West Palm Beach, Florida

20. Boise, Idaho

Forbes’ full list is also posted online.

Source: Forbes (01/27/16) Carlyle, Erin

© Copyright 2016 INFORMATION, INC. Bethesda, MD