The SchifferLine
Timely Real Estate News……………………1 December 2021
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US home sales rose in October…competition intense
Buyers continue to compete for a limited number of homes for sale across America, according to the National Association of Realtors (NAR). Existing-home sales increased 0.8% in October from the prior month to a seasonally adjusted annual rate of 6.34 million, the highest pace since January. Even though prices increased from September to October this year, sales fell 5.8% since last October 2020 when the market was at its peak for this cycle.
Low mortgage-interest rates have spurred a large wave of home-buying demand since the start of the Covid-19 pandemic. At the same time, the number of homes on the market has remained low, and new homes that are listed for sale are often snapped up quickly. As always it is truly a function of price… overpriced properties are sitting on the vine… even in a market like we are in.
Home sales typically decline after the summer. Many families do not want to move during the school year, and shoppers often stay home in cold weather and during the holiday season. High prices are also scaring off some buyers. The median existing-home price rose 13.1% in October from a year earlier, NAR said, to $353,900.
Even so, the market is on pace for its strongest sales in 15 years, said Lawrence Yun, NAR’s chief economist. “The housing market is remaining strong” due to continued low interest rates, a robust job market and rising stock-market values,” he said.
The frenzied housing market from earlier this year has somewhat plateaued. However, sales are still higher than pre-pandemic levels. Many buyers who have been sidelined by fast-rising prices are jumping back into the market if they see signs of a slowdown, economists and real-estate agents say.0
“The housing market is remaining strong” due to continued low interest rates, a robust job market and rising stock-market values,” Mr. Yun said.
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First-time buyers continue to struggle
It is no surprise in this inventory-challenged era that first-time buyers continue to struggle to compete with cash and non-primary residence buyers, according to the October 2021 Realtors Confidence Index report.
First-time buyers accounted for 29% of the existing-home buyers, a lower fraction compared to one year ago (28% in the prior month, 32% one year ago). The share of cash sales rose to 24% (23% in the prior month, 19% one year ago). The share of non-primary residence buyers (for rental and vacation/second home use) rose to 17% (13% in the prior month, 14% one year ago). Realtors reported that 23% of buyers waived the appraisal contingency clause (buyers who waived appraisal are likely cash buyers); and 21% waived the inspection contingency clause.
Among buyers who obtained a mortgage, the share who obtained FHA-insured mortgages decreased to 14% (15% in the prior month, 18% one year ago). Among first-time buyers, 72% put down less than 20% down payment, a lower share compared to one year ago (75% in the prior month, 76% one year ago). The report noted subdued market activity in October compared to one year ago and the prior month. The Realtors Buyer Traffic Index decreased further to 56 in October (57 in the prior month, 73 one year ago). Housing supply remains low, with the Realtors Seller Traffic Index registering at below 50 (“weak” seller traffic compared to one year ago).On average, sellers received nearly four offers (3.7) on their home sale (3.7 in the prior month, 3.4 one year ago). Respondents reported that on average, their buyer had made two prior unsuccessful offers on a home. Respondents reported that 42% of offers were above the list price, a lower fraction compared to 55% in June this year.
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Even with Zillow’s meltdown, iBuyer market surged
Before Zillow’s recent meltdown, national iBuyer market share surged to another all-time high, blowing past all previous records by a wide margin. In Q3 2021, iBuyers accounted for 1.6% of all homes purchased in the U.S. That’s around 28,000 homes, nearly double the 15,000 homes purchased by iBuyers in Q2.
The situation will certainly change with Zillow exiting the market and seasonality kicking in during Q4 2021. But for the time being, iBuyers have never been bigger, and Opendoor is now left as the undisputed category leader.
Also noteworthy: IBuyer Market share in Phoenix, the largest iBuyer market, peaked to a new high of 10.8%. This is the first time iBuyers have exceeded 10% market share in a major market — a significant, if temporary, achievement.
Both Opendoor and Zillow scaled their iBuying operations tremendously in Q3, but while Zillow’s business spectacularly imploded, Opendoor demonstrated critical economies of scale. As it grows, its net loss per home is improving.
What is this telling us? The great harm done by Zillow’s over-zealous approach to home evaluation caused enormous damage throughout the industry, especially for homeowners who falsely counted on equity in their home that simply wasn’t there. It is slowly healing now, but the trust between online data and actual home values has certainly taken a hit, a well-deserved one in my mind.
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“Let’s move closer to the kids…” A continuing trend
Parents, grandparents, friends — the desire to ‘stay close’ remains a major factor in why people are selling and moving these days. Among repeat home buyers and home sellers over the last year, a key factor for moving was the desire to live closer to family and friends, while an equally important motivator was the need for more space or a bigger home. Sellers as a whole were able to benefit in these transactions, typically earning their full asking price, and selling in one week.
These driving forces to move as well as further sales figures appear in the National Association of Realtors’ 2021 Profile of Home Buyers and Sellers, that analyses demographics, preferences and experiences of buyers and sellers across America. “During the pandemic, buyers and sellers have been driven by the desire to be close to family and friends, as well as the need for a larger home,” said Jessica Lautz, vice president of demographics and behavioral insights at NAR.
Among sellers, as a group they traded up in price, size and newer residences, as 46% purchased a larger home and 28% purchased the same size home.
Relocating to be closer to family had been increasing in recent years, according to Lautz, however, the COVID-19 outbreak accelerated that trend. And in past years, convenience to work and affordability had ranked as top factors for reasons to move.
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“Pouncing” is the new tactic in home buying
American home buyers are having to pounce faster than ever to clinch a deal, forcing many of them to make snap decisions about what house to purchase and how much to pay. I see it constantly — buyers are so afraid to miss a ‘deal’ or opportunity to purchase a home, they will bypass their own normal, conservative deliberations to ’snap up’ a home these days.
Home sales between July 2020 and June 2021 sat on the market for a median period of only one week before going under contract, according to a survey released last week by the National Association of Realtors. That is down from three weeks a year earlier and marks a record low in data going back to 1989.
The rapid turnover helps explain how the number of homes sold rose to multiyear highs during the Covid-19 pandemic, even as the inventory of homes for sale remained stubbornly low. The pandemic helped spark the biggest housing boom in more than a decade. Buyers that kept their jobs sought more space to work remotely and took advantage of low mortgage-interest rates. Many households also saved more during the pandemic and benefied from a rising stock market.
At the same time, supply has been constrained. Caution about showing homes during Covid-19, a reluctance among some owners to enter the competitive housing market and the ability to refinance at low rates kept many prospective sellers from listing their homes.
In such a fast-moving market, buyers have little time to commit to one of the biggest purchases of their lives and sometimes forego traditional safeguards. Many buyers have waived their rights to terminate a contract because of a low appraisal or unfavorable inspection to make their offers more competitive in a bidding war.
I caution my clients they are making an ‘investment of a lifetime’ and to be careful before making a final decision without carefully considering all of the ramifications of what that purchase will have on their lives for their future. I do understand the ‘panic’ that can set in with some clients — many of whom have been so frustrated in losing in bidding wars or simply not being able to find their dream home.
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Real estate investors aggressive in Q3
Investors continued to enter the market in droves during the third quarter of 2021, according to a report released last week. A record 18.2% of U.S. homes purchased during the quarter were snapped up by investors, up from 16.1% during the second quarter and from 11.2% the year before.
In total, investors bought 90,215 homes during Q3, an increase of 10.1% from Q2 and an increase of 80.2% year over 
year, marking the second-greatest annual gain ever recorded.
Risk of heat or storms haven’t deterred investors from purchasing homes in these high-risk areas. More than 65% of investor-purchased homes in the third quarter had a high heat risk, and about 64% had high storm risk. Just 27.1% of homes purchased faced high drought risk, 22.2% high flood risk and 3% high fire risk.
There seems to be no stopping investors who look at real estate as the single, most attractive investment, especially with the market suffering from the recent Covid variant from South Africa. Are we going back to the early pandemic days of 2020? Too early to tell, but real estate still remains high on every investor’s list.
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Surge in rental housing development continues
Home builders and other real estate companies are increasingly betting that would-be home buyers frustrated with a shortage of homes for sale and runaway prices will settle for renting their slice of the American dream.
Although individual homeowners and mom-and-pop investors still account for the vast majority of single-family rental homes, home builders have stepped up construction this year of new houses for rent.
In the third quarter, builders’ broke ground on 16,000 single-family homes slated to become rentals. That’s the highest quarterly total of housing starts for built-to-rent homes going back to at least 1990, according to an analysis of U.S. census data by the National Assn. of Home Builder
The trade association’s analysis includes only homes that builders are going to hang on to and rent out. That excludes homes being built to be sold to real estate investment trusts or investors planning to rent the properties.
Rents for U.S. single-family homes jumped 10.2% in September from a year earlier, according to real estate information company CoreLogic. The firm excludes apartments from its single-family home rental data, though it includes condominium and townhome rentals.
CoreLogic expects rents to continue climbing through at least the end of this year, citing strong demand, low supply of homes for rent and a strengthening job market.
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A Peak into my world
First a bit of personal sharing. As most of you may recall, my Mom passed away in June of 2020, and due to Covid my sister had not been able to come here until Sept of this year. Prior to that, she and our beloved caregiver/housekeeper for the last 40 years, over FaceTime went through EVERYTHING in Mom’s house and determined how things would be disbursed. It was an horrific job as Mom kept everything.. But they finally got through it and had items separated and packed up. Finally, this past Sept, my sister and brother-in-law were able to come here and have done so for the past 3 months, staying for two weeks at a time reviewing all of the boxes and making a detailed inventory of what was being sent to Canada and what is staying here.
That chore is in the final stages of being done, and now we are ready to sell the house to the buyers who have been waiting for us to get to this point.
Spending all of this time with my family has been wonderful, more than we have been able to do in years and created a wonderful relationship for us to grow. It will be sad to see the house go to new owners, as my sister and I both grew up in the house, but we know, that the new owners will be very happy raising their young family there.
As for work, I am busier than I have been in a long time. Buyers who are thrilled to have found a home to purchase and jumping through hoops to deal with multiple offers and prevailing. Sellers who are dealing with buyers and some of their at times unreasonable demands.
Currently I have one home in escrow where I am representing the Seller, and we have two back up offers, and on another where I am representing the Buyer there are two back up offers. The shortage of inventory is creating stress for all. We simply need more homes to sell. The buyers are definitely here. I have another buyer who is making an offer on a home in Santa Monica, and while we don’t know how many offers there will be when the sellers review the offers, I can only imagine there will be more than 10 as the open houses have been packed with potential buyers. I hope my client prevails as it is GREAT house and has her name all over it.
As we head into the strong holiday season, it is fun to show homes that are decked out
in their holiday decorations. It creates such a warm and homey feeling and makes it easy for buyers in see themselves living there. Contrary to common thought, the holidays have not slowed the market down at all. My loan officer told me yesterday that he had 11 openings for loans yesterday after the Thanksgiving holiday weekend!!!!
The market is still very strong and hot! And mortgage rates are low, still!!!
Happy Hanukah ! Stay Healthy and Safe Travels!
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