Housing Shortage Persists
Overall housing inventory plummeted 43% in January compared to the same month in 2020. New listings were also down by 23% year over year. The home shortage increased U.S. median home prices by 15.4%, up to a national average of $346,000. The market is so tight across the country that the typical home spent 76 days on the market in January - 10 days less than one year prior.1
47% of New Buyers Surprised by How Affordable Homes Are Today
Headlines matter. Right now, it’s hard to read about real estate without seeing a headline that suggests homes have become unaffordable for most Americans. In reality, there’s hard evidence that shows how owning a home is more affordable than renting in most parts of the country, as record-low interest rates are keeping monthly mortgage payments about 23% lower than the typical payment of 20 years ago. Despite the facts, misleading headlines persist, and they impact how hopeful homebuyers perceive the market.
In a recent survey by realtor.com, home shoppers indicated they were surprised by what they could actually afford when buying their first home. In fact, 47% discovered their budget was larger than they expected. George Ratiu, Senior Economist at realtor.com, explains:
“For first-time buyers, especially, the drop in the 30-year mortgage rate…has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same.”
So why do these negative headlines that cast doubt on affordability continue to exist? Most analysts only look at two of the three elements that make up the affordability equation: price and income. It’s true that incomes haven’t kept up with the price of houses. However, affordability is about the cost of the home, not just the price. For that reason, mortgage rates, the third element of the affordability equation, are important to consider.2
Natural Disasters Disrupting Buy-Sell Decisions
Record-breaking hurricanes, floods, wildfires, and tornados hit the United States hard last year, giving some buyers pause about where they want to put down roots, according to a survey conducted earlier this year. Of the 29 metro areas tracked in the survey, Houston residents were the most concerned about natural disasters. Nearly 60% said the frequency or intensity of natural disasters were "very much" factors in their decision to buy or sell a home. New York followed at 47%, and Miami was third at 46%. Respondents in the South and Northeast - 36% and 35%, respectively - said that natural disasters seriously affected their real estate decisions. Midwest respondents have the lowest concern about the impact of natural disasters.3
Credit Score Surprises, What Now?
FICO, Experian, Equifax, and TransUnion are different credit bureaus with propriety algorithms for calculating credit scores. Borrowers often encounter their credit scores' impact in mortgage pricing. What should they do if they discover they have a lower score than expected? A significant difference between their score and their expected score could indicate fraud using the borrower's information or an incorrect reporting status on an account. Both are best resolved by obtaining and identifying anomalies on their credit report. Borrowers with a score near the next-highest bracket also can use a credit report to chart a path to their desired score.4
For more information about how credit scores work, how best to get a free copy of your report, and how to raise your score, download our free Understanding Credit eBook or one of our credit checklists from our Resource Center.
Virtual Tours Hit Popularity High
Almost two-thirds of people who purchased a home last year - 63% of the nearly 2,000 polled - made an offer on a property they had not seen in person. The percentage is up from 32% a year ago and a new record, according to a recent study. Agents polled said less than 1% of tours were done by video at the beginning of 2020 - now about 10% of tours are viewed remotely. The survey results did not dissect which cause - pandemic shopping trends or the number of people moving to another state - is more responsible for the 10-fold increase in remote tours.5
Sources: 1 Realtor.com; 2 Market Trends Report; 3 CoreLogic; 4 Realtor.com, Experian; 5 Realtor Magazine