Housing Demand Shows Signs of Recovery

January 26, 2023

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What you should know:

According to new data from Redfin Corp, pending sales of US homes rose 2.9% in December on a seasonally adjusted basis, the first month-over-month increase since October 2021.
Other measures of demand, including data on the brokerage’s customers requesting home tours and people contacting the company’s agents, are up from November.
"The small uptick in pending sales suggests some homebuyers returned to the market at the tail end of 2022 after demand plummeted in the fall", says Chen Zhao, Redin Economics research lead.
The average rate on a 30-year fixed mortgage dropped to 6.15%, the lowest level since September, Freddie Mac said last week.
Redfin cautions that the situation varies from city to city and the market is still quieter than during the pandemic boom, with pending sales significantly down year-over-year in December.
Redfin also warns that the market isn’t out of the woods yet and any rebound could face pressure from a potential slowdown in the economy, an inventory shortage or affordability issues that sideline more buyers.

Biden announces 'Renters Bill of Rights' to improve affordability and protections

President Joe Biden is rolling out a new set of principles the White House is calling a "Renters Bill of Rights" in an effort to improve rent affordability and protections for tenants.
The president is directing the Federal Housing Finance Agency (FHFA) to examine limits on rent increases for future investments and actions promoting renter protections.
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have been tapped to root out practices that unfairly prevent applicants and tenants from accessing or staying in housing.
Nearly 50 progressive lawmakers, including Sen. Elizabeth Warren (D-MA) and Rep. Alexandria Ocasio-Cortez (D-NY), sent a letter to Biden earlier this month urging the president to take executive action to protect tenants from rising rents.
In Wednesday's announcement, the administration also sought to rally state and local governments — as well as the private sector — to protect renters.

A survey conducted by NerdWallet found that 28 million Americans plan to purchase a home in 2023, and on average, they hope to spend $269,200, which falls more than $100,000 short of the median home price, which was $388,100 in December.
Two-thirds of Americans surveyed said they expect an imminent crash in the housing market, but real estate economists do not. Lawrence Yun, chief economist for the National Association of Realtors, forecast an average sale price of $385,800 this year, about the same as last year. Redfin predicts a 4 percent drop.
61% of Americans told pollsters current mortgage rates are unprecedented, meaning that they have never been seen before, but the average rate for a 30-year fixed mortgage hit 6.15% last week, which is not unprecedented.
Part of the reason for the lack of understanding of the housing market is that home buyers have basked in a climate of historically low rates for more than a decade, and the Fed cut rates dramatically in the Great Recession of 2008 to stimulate the economy, a campaign that continued, on and off, through the COVID-19 pandemic.
The survey found more realism when asking respondents how their home buying plans had panned out in 2022, 70% of Americans who had planned to buy a home in 2022 did not succeed.

An interest rate buydown is where a seller agrees to pay mortgage points on the buyer's mortgage, lowering the interest rate.
Permanent buydowns are more beneficial than price reductions for the buyer and the seller.
Interest rate buydowns are a tool for sellers to use to secure a buyer instead of taking a lower offer or making other concessions.
With temporary buydowns, sellers can attract buyers who may be intimidated by a new mortgage payment by lowering the interest rate for the first two or three years.
With Permanent buydowns, buyers can save thousands over a price drop if they plan on living in the property for the life of the loan.

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