Homebuyers and Sellers in the Year Ending June 2022: Results from the National Association for Real Estate (NAR)-Algorithm
First-time buyers made up just 26% of all homebuyers in the year ending June 2022, down from 34% the year before, according to NAR’s 2022 report on homebuyers and sellers. That was the lowest in the survey over the last four decades. The share of buyers purchasing a first home has sat between 30% and 40% over the past decade and reached as high as 50% in 2009.
The median household income of first-time buyers was $71,000 in the year ended in June, down from $86,500 in the previous year. Meanwhile, repeat buyers had a median income of $96,000, down from $112,500 the previous year.
Mortgage rates have fallen since November and continue to show signs that inflation has peaked after climbing for most of the year.
Many potential buyers of color, even if they want to, are being denied homeownership because of the increasingly unaffordable housing market.
During the year ending in June, the overwhelming majority of buyers, 88%, were White, up from 82% the previous year. Of all home buyers, 8% were Hispanic, up from 7%. Meanwhile, 3% were Black and 2% were Asian, both dropping from 6% a year ago.
Lautz said that prior NAR research has shown that would-be Black homebuyers have lower incomes, higher debt and less likelihood of family support for a down payment than other groups. Black renters have a bigger share of their income going to their landlord, and this is according to the data.
Homebuying and the Fed’s Mortgage Rates Rise in the Short Term, and Mortgage Originators Follow in the Trail of Inflation
The affordability crunch made people less interested in purchasing in the area where they currently live. The median distance between a buyer’s current home and their newly purchased home was typically 15 miles between 2018 and 2021. A typical distance is 50 miles over the course of a year.
There was a home built in 1986 that was 1,800 square foot and had three bedrooms and two bathrooms. That is a smaller and older home than in previous years.
Freddie Mac’s data shows that the 30-year fixed-rate mortgage averaged 6.13% in the week ending February 2, down from 6.13% the week before. The 30-year rate was 3.50% a year ago.
Kenny Parcell, the president of the national association of real estate agents, said that new and low to moderate-income buyers are left behind in the competitive market. This reduction will allow more people across the country to achieve the American dream of homeownership, and alleviate some of the financial stress that potential buyers encounter when purchasing a home.
The Fed approved a quarter-point interest rate hike on Wednesday, the smallest since March. The move to slow the pace of increases sends a clear signal that the central bank is seeing progress in its battle with inflation.
While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates are usually tracked by the yield on 10-year US Treasury bonds, with a combination of anticipation about the Fed’s actions, what they actually do and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
As inflation pressures ease, mortgage originators have followed suit, lowering the cost of borrowing, said George Ratiu, Realtor.com’s manager of economic research.
He said that the Feds actions are keeping a floor undermortgage rates for the short term, and he expected them to stay there for the next few weeks.
Ratiu said most recent indicators pointed to a still-resilient economy. The rate of job openings in December was the highest since July, despite the Feds efforts to cool the economy.
Housing economists and those in the mortgage market are looking to the next report on inflation, set to be released February 14, to see if the pace of price hikes continues to slow.
The vice president and deputy chief economist of the Mortgage Bankers Association said that the overall application activity went down despite the lower rates. The spring homebuying season is expected to start with a boost in purchase activity because of lower rates and stabilizing home-price growth. Both trends will help some buyers regain purchasing power.”
Mortgage Rates and Insurance for the U.S. Home Buyers: Predictions for a 21-Year Mortgage Rate Survey and Impact to the Housing Market
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The borrowers who put 20% down are included in the survey. Many buyers who put down less money upfront or have less than ideal credit will pay more than the average rate.
An estimated 850,000 home buyers, mostly low- and middle-income and first- time buyers, will save an average of $800 per year on their home financing this year because of a change by the Biden administration.
But the action is expected to be of limited impact to the housing market, since rising mortgage rates have increased monthly payments by much more than the mortgage insurance premium savings.
It’s part of an ongoing effort to address housing affordability challenges in the United States. The Secretary of Housing and Urban Development said the change is expected to expand access to home ownership.
“As we reduce housing costs for people with FHA mortgages, we continue our work to address longstanding disparities in homeownership,” she said Wednesday.
If you are interested in buying a house, it is important to understand that the FHA does not directly give loans, but rather regulates and insures loans from private loan companies that can give advantages to buyers with smaller down payments and lower credit scores. FHA loans allow for down payments as low as 3.5% and allow borrowers to have lower credit scores than most conventional loans.
Some loans, like theFHA, have required mortgage insurance for homebuyers who arestruggling to enter the housing market. The insurance lowers the risk for the lender to make a loan, so that borrowers can qualify for a loan that they might not otherwise be able to get.
Home price appreciation and a large number of refinances over the past few years are contributing to the surplus and allow HUD to adjust and pass savings onto consumers without threatening the long-term viability of the mortgage insurance fund.
In areas where home prices have shot up, the savings will be greater: For example, a home purchased in Phoenix with a $400,000 mortgage will save the buyer $1,200 per year and a home bought in Austin with a $500,000 mortgage will result in a $1,500 per year saving, according to the administration.
The typical monthly principal and interest payment on a 30-year, fixed-rate loan for a median-priced $350,300 home in January 2022 with a 10% down payment was $1,425, according to data from Freddie Mac. The median-priced home cost $359,000 one year later, and the same loan had payments of over $2,000 per month: a difference of $545 each month.
And for borrowers buying new construction homes the share is even smaller. There were only 11,000 sales of newly constructed homes financed through FHA in the third quarter of last year, or 7.5%, according to the US Census Bureau. It was the smallest share in more than a year.
The National Association of Real Estate supports the move as it strikes an appropriate balance between helping homeowners and ensuring that the insurance fund is strong.