December 14, 2021 – A Stark Reminder. During our economic commentaries over the past three decades, we have been consistent in one area of advice – you can never predict the future.


Economic Commentary

A Stark Reminder. During our economic commentaries over the past three decades, we have been consistent in one area of advice – you can never predict the future. Thus, though you will see many predictions by eminent market analysts in our newsletters, we must constantly remind ourselves of this unshakeable maxim. The COVID pandemic represents the ultimate example of why predicting the future is impossible.

There were no timely predictions of the pandemic and there were no projections as to how long the pandemic would last. Moreover, the effects of the pandemic upon certain sectors of the economy were also unpredictable. Who would have thought that the mother of real estate booms would be triggered by the pandemic? Now we head into 2022 and our Thanksgiving meals are barely digested before we hear of another COVID variant – Omicron.

Will this variant be resistant to present vaccines and how quickly and widely will it spread? We don’t know the answer, but the day after Thanksgiving the markets were certainly reacting as though it was a major threat. Again, we are not predicting how grave this new danger will be, as we can’t predict the future. However, we do believe that the past two years have put us in a better position to weather this and future threats. This week the Federal Reserve meets and will be addressing the pace of tapering. Will Omicron affect their decision? We will know by tomorrow.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to be steady from week-to-week, but are still fluctuating on a daily basis. For the week ending December 9, 30-year rates moved down one tick to 3.10% from 3.11% the week before. In addition, 15-year loans fell one tick to 2.38% and the average for five-year ARMs decreased to 2.45%. A year ago, 30-year fixed rates averaged 2.71%, more than .33% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Mortgage rates have moved sideways over the last several weeks, fluctuating within a narrow range. Going forward, the path that rates take will be directly impacted by more information about the Omicron variant as it is revealed and the overall trajectory of the pandemic. In the meantime, rates remain low and stable, even as the nation faces declining housing affordability and low inventory.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

More Americans are showing a desire to move closer to their family and friends since the pandemic. They also want to upsize their home, according to the “2021 Profile of Home Buyers and Sellers,” an annual report published by the National Association of REALTORS®, released at the 2021 REALTORS® Conference & Expo. The report analyzes consumer real estate preferences. Eighteen percent of buyers said they wanted to move closer to family, friends, and relatives, and 17% of repeat buyers also desired a larger home, according to the report. In previous years, consumers’ top motivators to move were greater convenience to work and affordability. But home preferences are changing. The tenure in homes decreased from 10 years to 8 years—the largest single-year change in home tenure since NAR began collecting such data. Buyers, however, say they expect to live in their next homes much longer, a median of 12 years, and 18% of respondents said they’re never moving. “Home sellers have historically moved when something in their lives changed—a new baby, a marriage, a divorce, or a new job,” said Lautz. “The pandemic has impacted everyone, and for many, this became an impetus to sell and make a housing trade.” Additionally, the number of married buyers saw a slight decline: Sixty percent of repeat buyers were married, a share that has dropped from a high of 81% in 1985. On the other hand, the share of single women buyers rose to 19% from a recent low of 15% in 2014, NAR reports. Source: NAR

A new report from Zillow found that “For Sale By Owner” listings made up just 4-6% of all monthly listings nationwide and that they are mostly used by rural and low-income sellers. The report revealed that roughly 63,000 homes for sale in September 2021 were For Sale By Owner listings. Zillow economist Alexandra Lee also reported that rural and low-income sellers tend to use these listings more because they value the flexibility to sell their homes on their own terms. According to the report, 24% of rural sellers did not use an agent, compared to 16% of suburban and 20% of urban sellers. Additionally, across all markets, FSBOs are listed at prices 18% lower than properties represented by agents. Zillow says this trend is likely attributable to the location and size of the home, rather than the home being sold at a discounted price. The median listed price for an FSBO home is $292,810, while the median price of a home listed with a seller’s agent is $355,777. Meanwhile, the data shows homeowners with lower incomes are more likely to sell their properties directly. A household earning less than $50,000 annually is nearly twice as likely to sell a home without an agent than a household earning over six figures, according to the report. Around a quarter (24%) of sellers earning less than $50,000 sold their homes without the help of an agent over the past three years. Source: National Mortgage Professional

Taking notice of the increased appetite for U.S. real estate, investors are building up their portfolios of properties looking to cash in on the higher housing and rental prices. Investors purchased a record $64 billion of homes in the third quarter. Single-family homes comprised nearly three-quarters of investor purchases in the quarter, an all-time high, Redfin reports. In October alone, investors made up 17% of buyers, up from 14% a year earlier, the National Association of REALTORS® reported in its latest existing-home sales report. All-cash buyers, the category that investors tend to land in, accounted for 24% of home sale purchases last month. Overall, investors purchased a record high of 90,215 homes in the third quarter, up from 80.2% a year earlier. That is the second-largest year-over-year gain on record, Redfin reports. “Increasing home prices fueled by an intense housing shortage have created opportunities for investors to reap big profits,” says Sheharyar Bokhari, Redfin’s senior economist. “Those same factors have pushed more Americans to rent, which also creates opportunities for investors because investors typically turn the homes they purchase into rentals and can now charge higher rents.” Average monthly rents climbed 10.7% annually in September. Median home prices increased 13.1% in October year over year to $353,900, according to NAR. Source: NAR

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