After reaching a record high in August, pending home sales slid for the third consecutive month, as fast-rising home prices and low inventory started to impede the housing market. Higher interest rates this week will present an additional challenge in future data.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI fell 2.6% from 129.1 in October to 125.7 in November, the highest level for November. However, on a year-over-year basis, sales were still 16.4% higher than a year ago.
All four regions saw a decline in month-over-month contract activity, ranging from 1.1% in the South to 4.7% in the West. On a year-over-year basis, all four regions saw double-digit year-over-year growths, ranging from 10.4% in the West to 21.3% in the South.
Despite the declines in these three months, pending home sales still outperformed this year and housing demand remained strong due to recent, low mortgage rates. However, rising home prices driven by record-low inventory may hurt affordability, especially first-time buyers. More listings and home construction are needed to meet this rising demand.
On Thursday (Nov. 19), the U.S. Department of Justice announced the filing and proposed settlement of an antitrust case against the National Association of Realtors that alleged the association established and enforced illegal restraints on the ways Realtors compete.
With the case filing, the Antitrust Division simultaneously filed a proposed settlement that requires NAR to repeal and modify its rules to provide greater transparency to home buyers about the commissions of brokers representing home buyers (buyer brokers), cease misrepresenting that buyer broker services are free, eliminate rules that prohibit filtering multiple listing services (MLS) listings based on the level of buyer broker commissions, and change its rules and policy which limit access to lockboxes to only NAR-affiliated real estate brokers. If approved, the settlement will enhance competition in the real estate market, resulting in more choice and better service for consumers, according to the U.S. Department of Justice.
The National Association of Realtors announced on its website on Thursday that NAR had reached an agreement with the U.S. Department of Justice to develop rules that more explicitly state what is already the spirit and intent of NAR’s Code of Ethics and MLS policies regarding providing information about commissions and MLS participation.
The announcement authored by NAR General Counsel Katie Johnson in the Realtor Magazine section of the association’s website, stated, “Our rules and policies have long been recognized for creating a competitive and efficient market that benefits home buyers and sellers. This agreement resolves the DOJ’s questions about the multiple listing service (MLS) and commissions and enables NAR to remain focused on supporting our members as they preserve, protect, and advance the American dream of homeownership,” NAR
NAR 2021 President Charlie Oppler said in a videotaped statement, “We want to be absolutely clear that while NAR disagrees with the characterization of our rules and policies and NAR admits no liability, wrongdoing or truth of any allegations by the DOJ, NAR has agreed to make certain changes to its rules to address the questions raised by the DOJ.”
NAR’s Johnson, who also serves as the association’s Chief Member Experience Officer, stated that although the exact language of the settlement agreement is still being finalized for NAR’s rule changes, most of the changes seek to more explicitly state what is already the spirit and intent of NAR’s Code of Ethics and MLS policies regarding providing information about commissions and MLS participation.
“Buying a home is one of life’s biggest and most important financial decisions,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Home buyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition—including by internet-based methods of home buying and selling—by providing greater transparency to consumers about broker fees. This will increase price competition among brokers and lead to better quality of services for American home buyers and sellers.”
According to the complaint, NAR’s anticompetitive rules, policies, and practices include: (i) prohibiting MLSs that are affiliated with NAR from disclosing to prospective buyers the commission that the buyer broker will earn; (ii) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; (iii) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered; and (iv) limiting access to the lockboxes that provide licensed brokers with access to homes for sale to brokers who work for a NAR-affiliated MLS. These NAR rules, policies, practices have been widely adopted by NAR-affiliated MLSs resulting in decreased competition among real estate brokers, the DOJ charged.
NAR General Counsel Johnson went on to state on the NAR website that in accordance with the MLS system’s long-standing focus on creating an efficient, transparent marketplace for home buyers and sellers, the amount of compensation offered to buyers’ agents for each MLS listing will be made publicly available. Publicly accessible MLS data feeds will include offers of compensation, and buyers’ agents will have an affirmative obligation to provide such information to their clients for homes of interest.
“Relatedly, the rule changes re-affirm that MLSs and brokerages, as always, must provide consumers all properties that fit their criteria regardless of compensation offered or the name of the listing brokerage,” NAR’s Johnson wrote.
She also noted that there will be a rule enacted that will more definitively stated that buyers’ agents cannot represent their services as free to clients.
Finally, with the seller’s prior approval, a licensed real estate agent will have access to the lockboxes of properties listed on an MLS even if the agent does not subscribe to the MLS, NAR added.
NAR will work with the DOJ to agree on exact rule changes within 45 days; then the Board of Directors will then have to approve the new rules. The court overseeing the settlement must formally approve it.
“In entering this agreement with the DOJ, NAR disagrees with the DOJ’s characterization of our rules and policies, and NAR admits no liability, wrongdoing, or truth of any allegations by the DOJ. The agreement does not subject NAR to any fines or payments,” NAR’s Johnson stated.
She continued, “We’re proud to be associated with the MLS system that puts consumers first and benefits home buyers, sellers, and small-business brokerages—and is constantly building upon these principles. This agreement furthers NAR’s and the MLS system’s goal of creating an efficient marketplace that fosters cooperation between brokers for the benefit of consumers.”
The proposed settlement will be published in the Federal Register as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments regarding the proposed final judgment within 60 days of its publications to Chief, Office of Decree Enforcement and Compliance, Antitrust Division, U.S. Department of Justice, 950 Pennsylvania Ave., N.W., Washington, DC 20530. At the conclusion of the 60-day comment period, the court may enter the proposed final judgment upon a finding that it serves the public interest.
Boosted by historically low mortgage rates, existing home sales, as reported by the National Association of Realtors (NAR), rose for a fourth consecutive month in September and reached its highest level in more than 14 ½ years.
Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, increased 9.4% to a seasonally adjusted annual rate of 6.54 million in September, the highest level since May 2006. On a year-over-year basis, sales were 20.9% higher than a year ago.
The first-time buyer share decreased to 31% in September from 33% both last month and a year ago. However, price gains threaten this share in the future. The September inventory level fell to 1.47 million units from 1.49 million units in August and is down from 1.82 million units a year ago.
At the current sales rate, the September unsold inventory represents a 2.7-month supply, down from 3.0-month in August and 4.0-month a year ago. This low level supply of resale homes is good news for home construction.
Homes stayed on the market for an average of just 21 days in September, an all-time low, down from 22 days last month and 32 days a year ago. In September, 71% of homes sold were on the market for less than a month.
The September all-cash sales share was 18% of transactions, unchanged from last month but up from 17% a year ago.
Tight supply continues to push up home prices. The September median sales price of all existing homes was $311,800, up 14.8% from a year ago, representing the 103rd consecutive month of year-over-year increases. The median existing condominium/co-op price of $272,700 in September was up 9.9% from a year ago.
Regionally, all four regions saw month-over-month gains for existing home sales in September, ranging from 7.1% in the Midwest to 16.2% in the Northeast. On a year-over-year basis, sales grew in all four regions as well, with the Northeast seeing the greatest gain (22.9%).
Though sales have flourished and demand remains strong due to low mortgage rates, the imbalance between housing supply and demand could hamper future sales. Low inventory will not only continue to drive up home prices but also hurt affordability and homeownership attainment. Though housing starts remain at solid pace, more listings and home construction are still needed to meet this rising demand.
The CDC issues a nationwide ban on evictions through Dec. 31, but tenants who are behind on rent must advocate for themselves. We explain.
A national eviction moratorium is back in effect, this time with far broader protections than the now-defunct eviction ban established by the CARES Act. While the previous law only covered certain types of properties, the new moratorium effectively protects everyone living in one of the nation’s 43 million rental households, regardless of where they reside.
But the new ban on evictions, which went into effect Sept. 1 and is set to expire Dec. 31, didn’t come from Congress or the Department of Housing and Urban Development. Instead, it was issued by the Centers for Disease Control and Prevention, using authority granted to the federal government in a 1944 public health law. To that end, the stated purpose of the order is to keep people out of homeless shelters or other crowded living conditions that could worsen the spread of COVID-19.
Unlike previous federal measures, the CDC’s real estate leads order requires tenants who fall behind on rent to submit a declaration to their landlord that states they’ve lost income due to the coronavirus pandemic and have made an effort to look for financial assistance, as well as a few other conditions.
We’ll dig into this new eviction moratorium to unpack who is covered, what might not be covered and what you need to do now if you’re worried about getting evicted. Plus we’ll take a look at what other resources and options are available to help you stay in your home. We update this story frequently.
What does the new eviction ban do (and not do)?
The CDC’s new order halts evictions across the US for anyone who has lost income due to the coronavirus pandemic and has fallen behind on rent. It doesn’t prohibit late fees, nor does it let tenants off the hook for back rent they owe. It also doesn’t establish any kind of financial fund to help renters get caught up — a safeguard some have say is critical to preventing a massive wave of evictions when the ban lifts.
The order only halts evictions for not paying rent. Lease violations for other infractions — criminal conduct, becoming a nuisance, etc. — are still enforceable with eviction. And it only protects renters earning less than $99,000 per year ($198,000 for joint filers).
The order requires renters facing eviction to fill out an as-yet unreleased government form attesting to several things: The tenant has lost income due to the pandemic, is currently unable to pay full rent, has made an effort to pay as much as possible, has sought financial help where available and would likely end up homeless or otherwise forced to live in crowded quarters if evicted.
CDC’s order doesn’t change state laws
Any state-level eviction bans still in effect will remain in place as they are as broad or broader than that established by the CDC. To help you find out the status of eviction protection in your state, legal services site Nolo.com maintains an updated list of state eviction provisions.
Nonprofit 211.org connects those in need of help with essential community services in their area and has a specific portal for pandemic assistance. If you’re having trouble with your food budget or paying your housing bills, you can use 211.org’s online search tool or dial 211 on your phone to talk to someone who can try to help.
The online legal services chatbot at DoNotPay.com has a coronavirus financial relief tool that it says will identify which of the laws, ordinances and measures covering rent and evictions apply to you based on your location.
If you’re seriously delinquent or know you will be soon, you may want to consult a lawyer to better understand how laws in your area apply to your situation. Legal Aid provides attorneys free of charge to qualified clients who need help with civil matters such as evictions. You can locate the nearest Legal Aid office using this search tool.
Finally, if you can no longer afford rent on your current home, relocation might be an option. Average rental prices have declined across the US since February, according to an August report by Zillow. Apps like Zillow, Trulia and Zumper can help you find something more affordable. Just be aware that you may still be held responsible for any back rent you currently owe as well as any rent that accrues between now and the end of your lease (if you have one), whether or not you vacate.
“This year has been anything but normal and as the uncertainty lingers, mortgage rates remain near record lows,” said Sam Khater, Freddie Mac’s Chief Economist. “These rates continue to incentivize potential buyers and the home buying season, which shifted from spring to summer, will likely continue into the fall.”
30-year fixed-rate mortgage averaged 2.91 percent with an average 0.8 point for the week ending August 27, 2020, down from last week when it averaged 2.99 percent. A year ago at this time, the 30-year FRM averaged 3.58 percent.
15-year fixed-rate mortgage averaged 2.46 percent with an average 0.7 point, down from last week when it averaged 2.54 percent. A year ago at this time, the 15-year FRM averaged 3.06 percent.
The PMMS® is focused on conventional, conforming, fully-amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Housing will lead the economic recovery. Due to low mortgage interest rates, a renewed focus on the importance of home, and a lack of for-sale inventory, housing data has been a relative bright spot as the overall economy struggles to establish a rebound.
Due to this broader weakness (GDP declined at a -32.9% rate for the second quarter) and gains for residential-related economic activity, housing’s share of GDP reached its highest mark since the third quarter of 2007, increasing to 16.2% during the second quarter of 2020. The home building and remodeling component – residential fixed investment – held at 3.3% of GDP.
Housing-related activities contribute to GDP in two basic ways.
The first is through residential fixed investment (RFI). RFI is effectively the measure of the home building, multifamily development, and remodeling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees.
For the second quarter, RFI was 3.3% of the economy, recording a $564 billion seasonally adjusted annual pace (measured in inflation adjusted 2012 dollars). This did represent a decline from the first quarter, which recorded a post-Great Recession high pace of $638 billion.
The second impact of housing on GDP is the measure of housing services, which includes gross rents (including utilities) paid by renters, and owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units) and utility payments. The inclusion of owners’ imputed rent is necessary from a national income accounting approach, because without this measure, increases in homeownership would result in declines for GDP.
For the second quarter, housing services represented 12.9% of the economy or $2.2 trillion on seasonally adjusted annual basis.
Taken together, housing’s share of GDP was 16.2% for the quarter.
Historically, RFI has averaged roughly 5% of GDP while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. These shares tend to vary over the business cycle. However, the housing share of GDP lagged during the post-Great Recession period due to underbuilding, particularly for the single-family sector.
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that the 30-year fixed-rate mortgage (FRM) averaged 2.98 percent, the lowest rate in the survey’s history dating back to 1971.
“Mortgage rates fell below 3 percent for the first time in 50 years. The drop has led to increased homebuyer demand and, these low rates have been capitalized into asset prices in support of the financial markets,” said Sam Khater, Freddie Mac’s Chief Economist. “However, the countervailing force for the economy has been the rise in new virus cases which has caused the economic recovery to stagnate, and this economic pause puts many temporary layoffs at risk of ossifying into permanent job losses.”
30-year fixed-rate mortgage averaged 2.98 percent with an average 0.7 point for the week ending July 16, 2020, down from 3.03 percent. A year ago at this time, the 30-year FRM averaged 3.81 percent.
15-year fixed-rate mortgage averaged 2.48 percent with an average 0.7 point, down from last week when it averaged 2.51 percent. A year ago at this time, the 15-year FRM averaged 3.23 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
The volume of loans in active forbearance, in which borrowers are allowed to delay their monthly payments, fell by 435,000 from the previous week, according to mortgage data firm Black Knight.
That is the largest one-week drop yet.
Roughly 4.14 million loans were in forbearance, representing 7.8% of all active mortgages, down from 8.6% the prior week. That’s the lowest amount since April 28.
A man walks past the U.S. Capitol building in Washington, June 25, 2020.Al Drago | Reuters
The number of homeowners in government and private sector mortgage bailout plans declined for the second straight week, as borrowers who got in earliest saw their plans expire.
More borrowers, however, are getting extensions of those initial three-month plans, proving the pain in the market is not over yet.
As of Tuesday, the volume of loans in active forbearance, in which borrowers are allowed to delay their monthly payments, fell by 435,000 from the previous week, according to Black Knight, a mortgage data and technology firm. That is the largest one-week drop yet.
Roughly 4.14 million loans were in forbearance, representing 7.8% of all active mortgages, down from 8.6% the prior week. That’s the lowest amount since April 28. These loans together represent just under $900 billion in unpaid principal.WATCH NOWVIDEO03:31Covid-19 mortgage bailouts drop by 435,000 but extensions increase
By category, about 6% of all mortgages backed by Fannie Mae and Freddie Mac and 11.6% of all FHA/VA loans are in forbearance plans. Just over 8.2% of loans in private label securities or banks’ portfolios are also in forbearance. The largest drop in forbearances was in Fannie and Freddie mortgages, down by 200,000 during the week
“The reduction of roughly 435,000 was driven at least in part by the fact that more than half of all active forbearance plans entering the month were set to expire at the end of June,” said Andy Walden, an economist with Black Knight. “While the majority of those have been extended, this week’s data suggests a significant share were not.”
More than 26% of loans in forbearance were extensions, according to a count by the Mortgage Bankers Association for the week ending June 28. That share has increased steadily for the past three weeks.
The bulk of the loans in forbearance are government backed and part of the mortgage bailout program in the CARES Act, which President Donald Trump signed into law in March. It allows borrowers to miss monthly payments for at least three months and potentially up to a year. Those payments can be remitted either in repayment plans, loan modifications, or when the home is sold or the mortgage refinanced. For loans not backed by the government, most banks and private lenders have set up similar plans.
While the drop in active mortgage forbearances is encouraging, recent spikes in coronavirus cases in various states, in addition to the expiration of expanded unemployment benefits at the end of this month, present significant risk to the recovery in the mortgage market.
The National Multifamily Housing Council’s Rent Payment Tracker has found that 89% of apartment households—sourced from 11.4 million professionally managed units across the country—had made a full or partial June 2020 rent payment by June 13.
This number represents an increase in the share of collections over the same periods in May and April, when 87.7% and 85% of renters had made a rent payment, respectively. Notably, it also shows a 0.1 percentage point increase over the share of collections during the same period in June 2019.
“Once again, it appears that residents of professionally managed apartments were able to largely pay their rent. However, there is a growing realization that renters outside of this universe are experiencing profound hardships as the nation continues to grapple with historic unemployment and economic dislocation,” says Doug Bibby, NMHC president.
While rent collections appear to be on the rise, NMHC vice president of business strategy Sarah Yaussi warns that this data is not necessarily a forward-looking indicator, and no sources are available to show how rent is being paid based on income resources. About half of renter households report being affected by unemployment, which suggests that unemployment benefits could make a difference in renters’ ability to pay. This could become a concern in August, when expanded unemployment benefits are due to expire.
When asked if the worst is behind us, Chase Harrington, COO of Entrata, says it’s hard to tell. Despite rising leasing activity in May and into June, he also notes a decrease in renewals, as well as a rise in month-to-month leases. Brian Zrimsek, industry principal at MRI Software, reports a substantial spike in credit card payments in May, which could suggest either rent payment by credit card out of necessity or an attempt to receive credit card perks based on the relaxing of limits.
“In the midst of a pandemic and a recession, it is critical that those on the front lines are safely and securely housed,” Bibby adds. “Accordingly, we urge lawmakers to take swift action to create a Rental Assistance Fund and extend unemployment benefits so we can avoid future eviction-related problems and don’t undermine the initial recovery.”
Construction of new homes plunged just over 30 percent in April from the previous month, amid the widespread US lockdowns to prevent the spread of COVID-19, according to government data released Tuesday.
The collapse to just 897,000 units put the annual rate of housing starts 29.7 percent below the same month of 2019, the Commerce Department reported.
The declines were widespread across the country, with the Northeast taking the worst hit — a 44 percent drop in construction starts — while the Midwest saw a relatively small 15 percent decline.
Building of multifamily housing saw the most severe impact in most regions.
Meanwhile, permits for new construction, which in normal times is a sign of demand in the pipeline, fell 20.8 percent compared to March.
But with the ongoing coronavirus pandemic, these are hardly normal times.
“Due to recent events surrounding COVID-19, many governments and businesses are operating on a limited capacity or have ceased operations completely,” the Commerce Department said, adding that the data quality still meet publication standards.
Housing is a critical sector of the US economy and demand was high before the crisis, given low mortgage lending rates, and builders were struggling to keep up with demand while prices were moving higher.
Since the pandemic hit, the Federal Reserve has slashed the benchmark interest rate to zero, which could be expected to help support home buying. But with 30 million jobs lost to the pandemic — at least temporarily — the outlook remains uncertain.
Still, Ian Shepherdson of Pantheon Macroeconomics said, “Housing construction likely has hit bottom.”
“A steep drop in activity was inevitable given the lockdowns, but we think these numbers will mark the floor; May will be better, and June better still,” he said in an analysis, noting that mortgage applications had picked up, recovering more than half the pandemic-related declines.