Here's this week's roundup of news and resources, just for you.
Quick takeaways:
Sales drop as prices and rates soar.
Fixer-uppers do not usually provide a return on investment.
Buyers find bridge loans improve their competitiveness.
Economists expect big housing price increases to slow.
Homebuyers moved to lower-density areas during the pandemic.
Read on for our coverage.
Rising Rates and Prices Push Sales Down
Mortgage applications fell for the third straight week, the Mortgage Bankers Association reported. The combination of sky-high prices and fast-climbing mortgage interest rates gave prospective buyers less purchasing power. As a result, existing-home sales dropped 6.6% from the previous month, and new home sales fell by 18.2%. 1
Buying a Fixer-Upper?
High prices might have some buyers considering that fixer-upper home. But is it really worth it?
According to research from Remodeling Magazine, it depends. Smaller-scale home-improvement projects tend to have better returns on investment. Paint costs little but painting in contemporary colors can add as much as $3,000 to a home's sale price.
Without sweat equity, larger projects are less likely to recoup the investment. The closest to recouping cost - adding a manufactured stone veneer to a house - returned 96% of the original investment. Especially with prices for construction materials on the rise, returns on renovations are likely even lower in 2021. 2
Bridge Loans Boost Buyers
Prospective buyers may have to make offers that are contingent on selling their current home. That can put them at a disadvantage in a competitive bidding market. Short-term bridge loans let them waive that contingency and then pay back the loan as soon as their existing home sells. 3
Huge Price Gains May Not Last
Home prices rose 11.1% over the past year, the biggest jump in almost 15 years. Economists see monthly price gains beginning to slow and expect the frenzy to moderate as more inventory comes on the market in the spring and summer months. However, they warn that rising mortgage interest rates could pose a different affordability challenge later in the year. 4
Buyers Moving Away from City Centers
Fannie Mae economists saw a pronounced move away from dense cities during the pandemic. In a normal year, just over 9% of movers went from high-density zip codes to low-density ones. But in 2020, that figure jumped to 10.8% - a 20 percent increase over the prior year's rate. High-cost metro areas like New York and San Francisco saw the most flight. 5
Have any questions? Reach out to us. We are your home loan experts and are up to date with all the market industry information. kevnik@kevnikmortgage.com
Sources: 1 housingwire.com; 2 realtor.com; 3 magazine.realtor.com;
4 realtor.com; 5 fanniemae.com
