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- Two unusual market trends we're seeing
Two unusual market trends we're seeing
Plus, 3 ways buyers can get the upper hand
Unusual trends
We always like to spot unusual trends in the market, and today, we are spotlighting not just one, but two of them.
Our first story shows the dwindling impact of international buyers in the U.S. home market and how it’s reached a level we haven’t seen in 15 years.
In our second story, we tell you why new homes are now generally cheaper than existing homes, which is quite a different story from what we were seeing before the pandemic.
This just goes to show what our loyal readers know we say a lot (...maybe too often!). It’s so vital to stay up to date on the latest trends because, in our industry, we can’t take anything for granted. Major changes and shifts are happening all the time!
On that note, let’s shift into this fresh edition of The Blueprint!
- James and David
International buyers pull back from the U.S. market
The amount of existing home purchases from international buyers fell 36% between April 2023 and March 2024, according to the National Association of Realtors. Those buyers bought 54,300 existing homes during that period. That’s the lowest level of international investment since NAR began tracking it in 2009. Here’s other key data from that timespan they studied:
The total dollar volume of foreign buyer residential purchases was $42 billion, which accounted for 2% of $2.1 trillion of the dollar volume of existing home sales.
50% of foreign buyers paid all cash, compared to 28% among all existing-home buyers.
Here’s a breakdown of the top foreign buyers by country and their total spending:
Canada - 13% ($5.9 billion)
China - 11% ($7.5 billion)
Mexico - 11% ($2.8 billion)
India - 10% ($4.1 billion)
Colombia - 4% ($0.7 billion)
Here were the top destinations for foreign buyers:
Florida - 20%
Texas - 13%
California - 11%
Arizona - 5%
Georgia - 4%
Our take
International buyers are running into the same hurdles as domestic buyers, namely high prices and tight supply. But they’ve got one extra hurdle in their way–a strong U.S. dollar. That is making already expensive properties even pricier. This all explains why international buyers are pulling out of the market. That said, this is still an important group of buyers to study. As this report showed, half of all foreign-buyer purchases were all-cash deals, so they clearly have the means to put up the money. That’s huge.
New U.S. homes are now cheaper by the foot
New homes across the nation are now generally cheaper per square foot than existing homes, according to a new report from Zillow. The company found that, in May, new construction homes sold for $209.70 per square foot, while existing homes sold for $213.20 per square foot. That $3.50 difference marks the most significant discount in at least six years. This is quite a difference from before the pandemic, when new homes ranged from $15 to $22 more per square foot than existing homes.
On a local level, Zillow found that the median sale price of a newly constructed home in the L.A. metro area was $1.15 million in May. While the median sale price of existing homes was less ($970,000), new homes are $52 cheaper per square foot.
Here are the top 5 markets with the greatest price per square foot difference for new vs. existing homes:
Our take
This is excellent news for buyers. Not only are they getting the incentives commonly offered by builders, they are now seeing savings on a square-foot basis both nationwide and in 21 major metros. As we have been saying, if value and affordability are the main drivers motivating your buyers, their best bet is to go after a newly-built home. That’s where they’ll see the biggest savings.
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Where rents have fallen the most
Rents have declined year over year for the past 11 months in a row, according to a new Realtor.com report. In June, the median asking rent in the 50 largest metros was $1,743, which is $7 less than what renters paid a year earlier. However, although rentals are becoming more affordable, there’s still a long way to go. The U.S. median rent is just $11 (or 0.6%) lower than its peak in August 2022.
Here are the markets where rents have fallen the most year-over-year:
Our take
Here’s another tidbit from this great report. You might not believe this, but San Francisco is the only metro among the top 50 where current rent prices are lower than they were five years ago. It’s not because supply has increased, but because people moved away. Anyway, we always make sure to keep track of rental rates because they indicate how interest rates are trending. This report shows inflation is trending downward. The next important report on inflation is going to drop next Thursday. Consensus expectations project that year-over-year PCE inflation will be around 2.6%. Even though a cut in July is extremely unlikely, if this holds, then expect interest rate cuts to come in September. Most sell-side economists think that another rate cut in Q4 is in the cards, and while that’s genuinely possible, the odds aren’t great.
Schematics
The news that just missed the cut
Real estate investor optimism is rising
Useful step-by-step guide on media build-outs for your listings
White House proposal to cap rent hikes
Excellent negotiation advice to close more deals
Best and worst cities for first-time homebuyers, according to WalletHub
Foundation Plans
Advice from James and David to win the day
With more listings coming on the market and many listings growing stale, sellers are more willing to accept offers below ask. Many of them are willing to throw in some concessions too. We believe that one of the best ways agents can help buyers in our current market is to persuade sellers to pay all, or some portion, of the closing costs. Today, we’d like to offer you some other tips for helping your buyers make a great deal:
Craft a strong offer – Coming in, at, or near the asking price shows good faith and strengthens your request for closing cost assistance. In the offer, clearly state the amount of closing cost contribution you're seeking from the seller. Be very clear on both the comps and the days on the market in your local area. Right now, we believe it’s possible to come in below the asking price and still get some concessions in certain markets.
Package your offer in an appealing way – Explain why you think the seller should contribute to the closing costs, 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. Alternatively, show them how your offer will lead to a fast closing. As we said up top, a lot of listings are going stale. The share of listings staying on the market for more than 60 days is growing. Use that to your leverage. Also, 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.
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Just in Case
Keep the latest industry data in your back pocket with today’s mortgage rates:
Source: Unsplash
“The distance between dreams and reality is called discipline.” — Paulo Coelho
Discipline is destiny friends. Don’t let your dreams languish. Work hard to make them happen. Nobody else is going to do it for you.
Thanks for reading and have a wonderful weekend. We’ll see you here next Tuesday!
- James and David