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How Long Will the COVID-19 Real Estate Boom Last?

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The pandemic has impacted Americans in a variety of ways.  To say the real estate market, in many parts of the U.S., has changed in unexpected ways would be an understatement.  The demand for homes far outnumbers the supply in many areas of our country.   

According to an article published by CNBC.com,  reporter Kevin Stankiewicz finds, “Existing home sales increased 9.4% in September, surpassing expectations, and the median purchase price rose nearly 15% year over year, according to data released earlier Thursday by the National Association of Realtors.”

Consumers are enticed by low interest rates and, those who can afford and are able to, are moving out of major metropolitan areas to suburban areas or even to second homes in vacation areas, where they might be able to work remotely. 

Although buyers continue to search for homes and rush to put an offer in when they find the perfect home, the number of homes for sale has tightened up.  Nevertheless, it is anticipated that after the election, more sellers may decide to put their homes on the market.  One professional, Glen Kelman of Redfin, is quoted in the article, “I think the sellers are just looking long term at the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”

While many realize the type of demand for homes that has been occurring since the summer of 2020 cannot last forever, its is expected to continue into the new year as more and more Americans find ways and reasons to relocate.    

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What Went Wrong with the CARES Act?

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In response to COVID-19 related economic struggles many Americans are facing, Congress passed the CARES Act.  One benefit to Americans that was to come from this $2 trillion act that was made law in March 2020, was a ban on evictions on many rental units in the United States.  Effective until the end of July, federally financed properties, such as rental units backed by Fannie Mae and Freddie Mac, landlords were restricted from evicting their tenants.

One glaring issue with the act, according to an article published by CNBC.com is, ” the law failed to protect many struggling tenants during the pandemic because there was little effort to ensure that landlords followed it.”  The act does not detail any penalty for violating it, so it, in some cases, has been treated as more of a “guideline”.   Landlords across the country have moved forward with evicting their tenants, many of which did not realize they were protected by the CAREs Act and did not hire legal representation to assist them with challenging the eviction. 

The effects are devastating.   As one example, in Iowa, he article indicates “Data provided to CNBC by Iowa Legal Aid shows that during one week in July in Polk County, where Des Moines is located, 40% of the families forced to leave their homes were through evictions that violated either the state or CARES Act moratorium. “

President Trump signed an executive order shortly have the CARES Act expired, yet many experts in the housing advocate field indicate that it provides protection to even fewer renters and still does not provide guidance to ensure its enforced.

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Photo Credit: Morning Brew

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How are Small Businesses Weathering the Pandemic?

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Many Americans’ lives have been affected by the pandemic, perhaps medically and emotionally but its also reached their social, academic and professional lives.  Those who have seen some of the most financial impact are small business owners.  Many had to close their doors for a period of time due to local restrictions; even after being able to open, business operations had to be significantly changed.   When small business owners were polled back in April 2020, only about 35% of the owners of small businesses were confident they would still be in business in the next year.

According to an article published by CNBC.com, reported by Lori Ioannou, more and more small business owners are feeling more optimistic.  In a more recent poll, 64% of these small business owners felt that they can remain in business, and in fact, many felt they might also be able to increase revenue.  The article goes on to provide details about what factors are allowing these business owners to feel they have the tools to succeed.

The government programs such as Paycheck Protection Program (PPP) and economic injury disaster loans have, as Ionnau states, “given some businesses a life preserver to ride out the economic uncertainty. And the loans have given owners time to pivot and reinvent their business models so they survive the new normal.”  For example, some businesses have begun utilizing technology more readily by being more active online, creating new products as well as growing their direct-to-customer business model.

Consumers have also rallied to support local businesses by choosing to buy locally.  For example, local restaurants have expresses gratitude to patrons who have ordered curbside or take-out food more frequently than in the past and increasing the amount of their tips to show both financial and emotional support.

As time goes on, some businesses will see that closing their doors might be inevitable and some businesses will thrive and succeed due to creative business practices or just by nature of their business and the product. 

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Photo Credit Tim Mossholder

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Amid the Pandemic, Mortgage Rates Set Records

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As residents of the U.S. sort through the many updates on the progress of containing the outbreak of COVID-19 cases, anxiously await news for a vaccine and patiently waiting to find out when life will return to some sense of normal, the U.S. economy fluctuates with the positive and not so encouraging updates.  Most recently, the news of the economic uncertainty due to the pandemic has impacted mortgage rates, yet again.

According to an article published by CNN, mortgage rates recently dropped below 3% for a 30 year mortgage.  This drop marked a 50 year record low for mortgage rates.  As a result, many home buyers, and those that were sitting on the fence debating purchasing a home, have decided that there’s no time like the present to make the move.  The demand for homes has increased, especially since the lower rates has allowed more prospective home buyers to afford homes that might have been just beyond their reach just a few short weeks ago.

However, just as the daily news cycle is filled with promise coupled with concerning medical and economic updates, the good news about rates is wrapped with a warning of what may be on the horizon.  Since the rise in coronavirus cases seems to be surging again, more job layoffs and even job losses could be inevitable.  Obviously, as unemployment rises, home buyers can be hesitant, if not unable, to purchase a home.

As the article quotes Danielle Hale, chief economist for Realtor.com, things could look up soon, “On the upside, signs of progress toward a coronavirus vaccine give hope that there’s a path to a new normal where health concerns don’t dominate decision making.”  We all hope that comes sooner rather than later.

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Is the Real Estate Market on Track for a Comeback?

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At first glance, reported home sale prices that only increased .5% year over year in May 2020 might appear to be disappointing news for real estate professionals and their customers.  However, according to an article published by Redfin.com, the slight gain was mostly impacted by the small number of homes selling in expensive U.S. cities.  Further, Redfin’s lead economist Taylor Marr sees some positive news based on other spring sales numbers, stating, “Although the housing market was still mostly stalled in May, it’s worth noting that homes under contract to be sold jumped 33% between April and May after two consecutive months of decline.  This is a key leading indicator for home sales in June and July. New listings of homes for sale have also likely passed their bottom…”

Nevertheless, the market still has a ways to go before it is back on track to performance during the pre-COVID-19 shut down.  Although all large metro areas in the U.S. have seen significant declines in home sales as compared to last spring, areas such as Michigan and Pennsylvania saw decreases of over 60%.  These are examples of a couple of states that were the most restrictive for staying at home during the pandemic’s initial outbreak.

Yet, good news appears to be on the horizon.  New listings, according to the article, increased almost 36% from April.  Additionally, days on the market and number of homes selling above list price remain positive, signs of a strong buyers’ market continued throughout the state wide shut downs, due to continued low inventory of homes and low mortgage rates.   

Read the entire article for more details and highlights across the nation’s metro areas.

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Will the Supply of Homes Catch Up with Increasing Demand?

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The global pandemic brought the U.S. real estate market to a screeching halt during the spring months of March and April.  With stay at home orders in place and uncertainty among Americans about the best ways to stay safe from the spread of COVID-19, many sellers decide to hold off or cancel listing their home for sale.  However, May has brought loosened restrictions for business and social interactions, leaving Americans feeling that it may be safer to resume some activities that had been put on the back-burner.  Specifically, Americans that want to purchase a new home are beginning to ramp up their search and even make offers to purchase homes.

However, the fact remains that the number of homeowners listing their homes had been steadily declining. And despite a small up-tick, the supply for homes continues to be low, down by almost 30% annually as of the first week of May.  Nevertheless, there is a significant number of potential home buyers that are looking to take advantage of low mortgage rates.  Not to mention, many Americans have spent more time in their current homes during stay at home orders, helping them realize they need a larger home, perhaps a home office or more outdoor space.  These factors have helped drive up the demand for homes in many parts of the U.S.

CNBC.com published an article by Diana Olick that describes a major uptick in bidding wars for homes as a result of the mismatched supply and demand.  In fact, the article says, “More than 41% of homes faced a bidding war in the four weeks ending May 10, according to Redfin.”  Realtors in areas such as Boston, San Francisco and Fort Worth, Texas, indicate that more than 60% of purchase offers are met with competition from other buyers.

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Positive Trends in Home Purchases are Encouraging to Real Estate Professionals

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Across the country, Americans have been sheltering in place and practicing social distancing in an effort to help slow the spread of COVID-19.  Many normal activities have been modified or even put on hold.  With the slow reopening of the country, many potential home buyers have emerged and seem to be ready to take the leap into home ownership.

Mortgage applications, according to an article published by CNBC.com, rose for the fourth consecutive week, up by an encouraging 11 percent.  Despite the fact that, overall, mortgage applications are still about 10 percent lower than they were this time in 2019, it appears the gap is closing.

The article, written by Ty Wright, quotes MBA economist Joel Kan, ‘”We expect this positive purchase trend to continue — at varying rates across the country — as states gradually loosen social distancing measures, and some of the pent-up demand for housing returns in what is typically the final weeks of the spring home buying season.”’

Despite the fact that refinance applications have been on the decline, after a very busy early spring, it appears home purchases may fill that gap. In fact, according to the article, mortgage applications are up pretty significantly, “New York led the purchase demand with a 14% jump in those applications. Illinois, Florida, Georgia, California and North Carolina also had double-digit increases last week.” It seems buyers, anxious to return to some normal life activities and move forward with purchasing their first or next home, are encouraged by mortgage rates that are still below 3.5% for a 30 year period.

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How Will Housing Prices Be Affected by COVID-19?

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It may not come as a surprise to read that the housing market has been affected by the COVID-19, but many home owners and potential buyers may be curious what experts think the future holds for this year’s real estate market.

As stay at home restrictions coupled with fears of the spread of the pandemic began in March, pending sales on homes took a direct hit.  In fact, they fell 20.8% in comparison to February.  According to an article published by CNBC.com, the housing market had already been impacted by a shortage of homes for sale.  As the news and impact of COVID-19 settled in, the shortage became more drastic as owners decided not to list and some homes were actually de-listed. 

However, experts believe, according to this piece written by Justin Sullivan, that this impact should turn around.  Quoting Lawrence Yun, NAR’s chief economist, “The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts. As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.”

After 5 weeks of decreasing mortgage applications, there was recently a double digit rise in mortgage applications.  And, although the home sales may be low for the year, home prices should not be impacted.  The fact that there is still a shortage of homes and the mortgage rates are low enough to attract buyers, prices could see some significant increases.

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How Will Homeowners Be Expected Pay Back Paused Mortgage Payments?

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As American homeowners suffer economic losses due to the global pandemic, mortgage companies allowed their borrowers to pause their mortgage payments, also known as forbearance.  This offers some relief and peace of mind to homeowners struggling to pay their monthly bills due to job loss or a reduction of pay.

However, in recent weeks, incorrect or misinterpreted information has caused some homeowners to panic, believing that once the forbearance period comes to an end, they will be expected to pay their missed mortgage payments back in a lump sum.  An article published by HousingWire.com sets the record straight.

The article, written by Ben Lane, indicates “Fannie Mae and Freddie Mac each issued a statement Monday, reiterating that borrowers are not required to repay their missed payments all at once when their forbearance period ends.” Additionally, Lane quotes the Federal Housing Agency Director, ‘“During this national health emergency, no one should be worried about losing their home,” FHFA Director Mark Calabria said in a statement. “No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages.”’

Its important for borrowers and lenders to understand and communicate the next steps and what will be expected of the borrower once the forbearance period comes to an end.  Many lenders will offer a repayment plan, a payment deferral or a modification of the loan.  The borrower should reach out directly to their lender and discuss the details of these next steps.

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How is COVID-19 Impacting Real Estate Sales?

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The impacts of COVID-19 are far-reaching and include not just health concerns, but concerns about jobs and the economy.  An obvious result of the turbulent economy and the alarming rate Americans are losing their jobs is a down turn in the real estate market. 

According to an article published by Market Watch, “…the rapid rise in unemployment as a result of the coronavirus pandemic and its accompanying stay-at-home orders will curtail many Americans’ ability to afford a purchase as big as a home”, states reporter Jacob Passy.  Further, sellers are more hesitant to put their homes on the markets due to uncertainty about pricing and the desire to avoid strangers from entering their homes unnecessarily.As a result, Fannie Mae projects that home sales will fall by almost 15% in 2020. 

Yet, this doesn’t necessarily translate to bad news the prices of homes.  Fannie Mae still expects the median prices of homes to rise for both existing and new homes.  Further, the article states, “The mortgage giant currently expects the U.S. economy and home sales both to rebound in 2021. But that rebound is contingent on the pandemic’s trajectory.” 

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