Down payments see big increase

Exclusive event in Los Angeles

As you know, we have now partnered with our good friends at Estate Media. They share our mission of giving agents the info they need to succeed.

If you live in the Los Angeles area, make sure to check out their upcoming event– the Exclusive NAR Open Table on Wednesday, April 3rd at 5pm PT in Beverly Hills.

The panel will be moderated by Andrew Shanfeld, co-founder of Carolwood LP and Estate Media. He’ll be joined by Josh Flagg, Aaron Kirman, and Brenden & Rayni Williams. They’ll discuss the latest moves by the NAR and other big changes in our industry.

This is such a great chance to get direct insight from some of the top names in our business. Limited seating is available, so make sure to reserve your spot now!

- James and David

Median down payments are up

Median down payments in February were up 24.1% from a year ago, the largest annual increase in percentage terms since April 2022. $55,640 was the median down payment, up from $44,850. That’s according to a new report from Redfin. Here are other key takeaways from February:

• 34.5% of U.S. home purchases made were all-cash deals, up from 33.4% a year earlier. The all-time high for all-cash deals is 38% (in 2013).

• The typical homebuyer’s down payment was equal to 15% of the purchase price, up from 10% a year earlier.

• 15.5% of mortgaged home sales used an FHA loan. Those loans are more common now than they were during the pandemic homebuying boom.

Our take

We like what we’re seeing here. At the start of this year, a lot of people weren’t expecting to see trends like these. The high mortgage rates aren’t stopping motivated buyers from getting the homes they want. Also, a lot of buyers are going all-cash, which is definitely good to see. Agents need to capitalize on this situation. While the circumstances aren’t perfect, there are deals to be made in this market!

Freddie Mac mortgage rates remain high 

The Freddie Mac fixed rate for a 30-year mortgage fell slightly last week, dropping from 6.87% to 6.79%. It has stubbornly remained within the range of 6.6% to 7% since last December. 

Unsurprisingly, this is affecting mortgage applications nationwide. Applications to refinance a home loan fell 2% for the week and were 9% lower than one year ago. Applications for a mortgage to purchase a home dropped 0.2% week-to-week and were down 16% year-over-year.

Our take

While we’re now heading into Q2 of 2024, the fundamental dynamics of the real estate market haven’t changed since January. Mortgage rates are only going to drop when the Fed cuts interest rates. Until then, we’re all going to have to deal with elevated mortgage rates. This falls heavily on first-time homebuyers, who typically don’t have the income or the equity to leverage. The good news is that these rates aren’t preventing sellers from listing in increasing numbers, and–as we discussed in our first story–they aren’t keeping motivated buyers from getting what they want.

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Where rents have changed the most

The monthly cost for the average one-bedroom apartment bumped up to $1,487, a 0.3% increase from February, according to a new report from Zumper, a real estate data site. The price of a typical two-bedroom apartment also jumped 0.5% to $1,847. 

Rents across the U.S. grew for the first time in 6 months. Only Arizona saw price drops in every metro. Here are the markets where rents fell and rose the most::

Our take

We’re keeping an eye on this story. Rents are such an important component of our measures of inflation. If they continue to rise, we might wait longer for the Fed to cut interest rates. While we’re concerned, we’re not worried. The positive inflation data that came out on Friday makes us feel a little better. By our projections, the earliest we anticipate any cuts from the Fed is June or July. It’s a waiting game now.

Schematics

The news that just missed the cut

• FHA responds to questions raised by NAR settlement 

• Here’s what you need to know about the MLS, especially after Sitzer/Burnett

• NAR settlement: Built for this says OpenDoor

• Watch these hilarious home tours

• NBA star Tony Parker’s 53-acre estate drops for $16.5 million. It has a private water park!

Foundation Plans

Advice from James and David to win the day

One of the ways you can help buyers in our current market is to persuade sellers to contribute paying all or some portion of the closing costs. It’s a negotiation skill every agent needs to have. Today we’d like to offer you some tips to help give your buyers an edge and some relief.

Craft a strong offer –  Coming in at or near the asking price shows good faith and strengthens your request for closing cost assistance. Clearly state the amount of closing cost contribution you're seeking from the seller in the offer. Be clear, concise, and confident.

Package your offer in an appealing way – Explain why you think the seller should contribute to the closing cost, and why your offer makes sense. For example, present your offer as an alternative to a lower sales price. The seller might see it as a wash financially, but it keeps the appraised value higher. Also, show them how your offer will lead to a fast closing. While closing costs are your goal, be open to other concessions. Maybe it's a lower earnest money deposit or a faster closing date that will do the trick.

Work with a lender who offers lower closing costs – This strengthens your case for the seller covering the remaining amount. Sellers are often more open to granting seller concessions if the buyer’s demands aren’t exorbitant.

To learn more about closing costs and how to negotiate, start here and here. 

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“The best way to achieve wisdom is to learn the big ideas that underlie reality…. Even people who aren’t geniuses can outthink the rest of mankind if they develop certain thinking habits.” — Charlie Munger

That’s it for today’s edition. We’ll be back in your box on Friday! 

- James and David

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