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These major cities need homes desperately
Plus, existing home sales break long streak
Rinku Mathew
June 27, 2023
Getting creative
We’ve talked a lot in this newsletter about how, in this market, we all might need to get a little creative with financing in order to make a home sale happen. Today, we’re giving you three helpful tips to keep handy in case you’re in this particular situation.
This kind of knowledge is so crucial to us agents. We all want to help our clients get into the homes of their dreams, and sometimes, the pathway isn’t so straight. There are a lot of zigs and zags you can take to get there.
Scroll down to see three creative zigs and zags you can take. Hopefully, it will lead to your client walking through the door of their new home!
- James and David
Existing home sales break long streak
Myrtle Beach: https://tinyurl.com/yr2vfjyt
Existing home sales notched a monthly increase for the first time in a year and a half, according to Zillow’s analysis of the latest NAR data. Here are other key numbers from May
4.3 million existing homes were sold (seasonally adjusted annual rate), up 0.2% from April
Existing home sales are still down 20.4% YOY
Total housing inventory amounted to 1.08 million units, totaling 3 months of supply at the current sales pace.
The median existing-home price for all housing types was $396,100, down 3.1% YoY.
Our take
This is very good news, but it doesn’t mean buyers aren’t still facing a lot of challenges. Inventory of homes for sale is still very low. Mortgages are as volatile as ever. Yet, the demand for homes is not letting up at all, and a lot of buyers out there can afford to keep looking. Although builders are constructing new homes, at some point, we’ll need rates to go down so owners of existing homes are willing to sell. Until then, this far-from-ideal situation will persist for a while.
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Rents see annual drop for first time in three years
Sarasota: https://tinyurl.com/d7kve85r
In May, for the first time since 2020, rents fell 0.5% year-over-year to a median of $1,739 a month in the 50 largest metropolitan areas. That’s according to the latest report from Realtor.com. Here are some other key numbers:
Rents in the Midwest are slowing, but increased 4.5% YoY
Rents in the West (-3.0%) and South markets (-0.7%) dropped YoY
Rent for 2-bedrooms saw its first ever YoY decline on record, while smaller units saw rents increase.
Rents are expected to to drop another -0.9% by the end of this year
Our take
Obviously, this is excellent news for renters who have been grappling with financial challenges. Equally important, though, are the larger economic implications of these declines. This shows the fight against inflation is working. Housing prices – aka: shelter prices, as the FED likes to call them – are one of the main drivers of inflation. The faster they go down, the faster inflation goes down. The faster inflation goes down, the faster mortgage rates go down. Hopefully, then, we can return to a more sustainable and balanced housing market.
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The metros that need to build the most
San Francisco: https://tinyurl.com/573r6k7v
The United States needs 4.3 million more homes to keep pace with population growth. That's the conclusion Zillow reached after its analysis of census data and construction starts.
There’s a dramatic imbalance between household formation and new home construction. Between 2015 and 2021, the number of housing units built increased by 6.3 million while the number of families living in the United States increased by 7.9 million.
Here are the top metros needing homes and how many they need:
New York, NY – 376K
Los Angeles, CA – 334K
San Francisco, CA – 162K
Boston, MA – 152K
Washington, DC – 134K
Seattle, WA – 109K
San Diego, CA – 94K
Chicago, IL – 87K
Phoenix, AZ – 87K
Portland, OR – 77K
Our take
Ever since the Great Recession, builders have been extremely cautious about over-building. Local governments have also strictly regulated how many new homes can be built. Both of these trends have resulted in the disastrous situation we’re in now. Sure, builders have recently ramped up construction but the levels are clearly nowhere near where they need to be. The fight against the under supply of housing has only begun, and we’ve got a long way to go.
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Schematics
The news that just missed the cut
Source: Mansion Global
We’ve partnered with a GREAT company to give you FREE leads. Visit Boomtown and use promo code BLUEPRINT to get a whopping $750 in FREE digital advertising!
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Foundation Plans
Advice from James and David to win the day
We’ve been saying that agents will need to get creative with financing to help buyers in our current market. Today, we’d like to go over some concrete examples of what we mean by creative financing.
Use seller credit for rate buydowns – Instead of negotiating down the asking price of a home, negotiate to have the seller buy down the buyer’s mortgage rate. The cost to the seller is the same and negligible, but the savings to the buyer are substantial.
Seller Financing – Just as it sounds, this strategy involves the seller giving a home loan to the buyer of the property, who then pays the seller back with interest. The buyer benefits with a lower interest rate than what a bank would offer, while the seller benefits by being paid back at an interest rate that’s likely higher than what a savings account or CD would yield.
Assumable or Transferable Mortgages – An assumable or transferable mortgage allows the buyer to purchase a home by taking over the seller's mortgage loan. This allows the buyer to purchase with a lower interest rate if mortgage rates have gone up since the seller originally purchased the home (which is obviously the case in our current market). Not all home loans, though, are transferable. Typically, FHA, VA, and USDA loans qualify.
Every situation is different, so different strategies will apply. To learn more, start here.
Q+A
You ask, James and David answer!
Q: Does your team prospect daily? And if so, what percentage of the day would you say is phone work?
A: Prospecting is a huge part of our everyday life! Our team spends at least 50% of the week prospecting, including door-knocking and cold calling. We always say that if the phones run dry, you have to switch it up, so we’re always prospecting one of those lead sources.
To us, prospecting is something you have to do no matter what, even if you are successful. Remind yourself, we are in the business of creating relationships!
We’ll be back next week with another answer to a real reader question. Submit yours here!
Just in Case
Keep the latest industry data in your back pocket with today’s mortgage rates:
Source: Rocket Mortgage
“The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and starting on the first one.” - Mark Twain
Thanks for reading, and we’ll see you Friday!
