Chicago and New York City Areas Remain Most Exposed to Potential Impact of Coronavirus Pandemic in Third Quarter of 2021; Other Vulnerable Areas Spread Mainly Along East Coast; Housing Markets in West Region Again Less At-Risk

Published: Oct. 21, 2021 at 12:01 AM EDT|Updated: 15 hours ago

IRVINE, Calif., Oct. 21, 2021 /PRNewswire/ — ATTOM, curator of the nation’s premier property database, today released its third-quarter 2021 Special Coronavirus Report spotlighting county-level housing markets around the United States that are more or less vulnerable to damage from the ongoing Coronavirus pandemic still endangering the U.S. economy. The report shows that New Jersey, Illinois and Delaware had the highest concentrations of the most at-risk markets in the third quarter – with the biggest clusters in the New York City and Chicago areas – while the West remained far less exposed.

The third-quarter trends, which generally continued second-quarter patterns, revealed that New Jersey, Delaware and Illinois had 26 of the 50 counties most exposed to the potential housing-related impacts of the pandemic. They included eight counties in the Chicago metropolitan area, six near New York City, along with two of Delaware’s three counties. Three counties in the Philadelphia, PA, suburbs also made the top-50 list.

Elsewhere, the rest of the 50 most vulnerable counties were scattered mainly along the East Coast states. Among them, only Florida had more than three counties in the top 50.

Just two western counties, both in California, made it into the top 50 during the third quarter of this year, while the West again had the highest concentration of markets considered least vulnerable to pandemic-related damage.

Markets were considered more or less at risk based on the percentage of homes facing possible foreclosure, the portion with mortgage balances that exceeded estimated property values and the percentage of average local wages required to pay for major home ownership expenses on median-priced houses or condominiums. The conclusions were drawn from an analysis of the most recent home affordability, equity and foreclosure reports prepared by ATTOM. Rankings were based on a combination of those three categories in 570 counties around the United States with sufficient data to analyze in second and third quarters of 2021. Counties were ranked in each category, from lowest to highest, with the overall conclusion based on a combination of the three ranks. See below for the full methodology.

The third-quarter patterns, showing the most and least at-risk markets, emerged as the national housing market remained super-heated, continuing its decade-long boom, even as other major sectors of the U.S. economy only gradually rebounded from damage caused by the pandemic that hit in early 2020. Median single-family home prices continued soaring more than 10 percent on an annual basis across much of the country during the third quarter of this year, as homeowner equity kept improving.

A few signs of a possible slowdown have emerged recently in the form of declining home affordability, slumping investor profits and rising inflation. But the pandemic has started receding over the past month and the economy has continued growing, providing room for even more home-price increases.

Nevertheless, the pandemic remains a threat to the economy and the housing market as cold weather approaches and nearly half the U.S. population remains unvaccinated.

“There’s growing reason to think the Coronavirus pandemic may finally be heading into the history books as case numbers have dropped significantly in the past month or so. But it still poses a significant threat to the economy, with some housing markets in pockets of the country remaining at higher risk than others,” said Todd Teta, chief product officer with ATTOM. “It’s important to stress that this doesn’t mean that any one area faces imminent danger, especially given how well the housing market has avoided major problems during the pandemic. Rather, some are more at risk than others. We will continue watching prices, affordability, distressed property counts and other measures to gauge the risk, as long as the pandemic remains a big issue facing the country.”

Most vulnerable counties clustered in the Chicago, New York City and Philadelphia areas, as well as Delaware
Twenty of the 50 U.S. counties most vulnerable in the third quarter of 2021 to housing market troubles connected to the pandemic (from among the 570 counties with enough data to be included in the report) were in metropolitan areas around New York, NY; Chicago, IL; Philadelphia, PA; and in the state of Delaware.

They included eight in Chicago and its suburbs (Cook, De Kalb, Du Page, Kane, Kendall, Lake, McHenry and Will counties) and seven in the New York City metropolitan area (Essex, Hunterdon, Monmouth, Ocean, Passaic and Sussex counties in New Jersey and Rockland County in New York). The three in the Philadelphia, PA, suburbs were Camden and Gloucester counties in New Jersey and Delaware County in Pennsylvania. Kent County(Dover) and Sussex County (Georgetown) in Delaware also were among the top 50 most at-risk in the third quarter.

In other states, Florida had four counties in the top 50 list: Bay County (Panama City), Clay County (outside Jacksonville), Lake County (Orlando) and Miami-Dade County. Four additional counties in Illinois also were among the 50 most exposed to pandemic-related damage. They were Champaign County, Kankakee County (south of Chicago), Madison County (outside St. Louis, MO) and Saint Clair County (outside St. Louis, MO).

The only western counties among the top 50 most at risk from problems connected to the Coronavirus outbreak in the third quarter of 2021 were Shasta County (Redding), CA, and Humboldt County (Eureka), CA.

Higher levels of unaffordable housing, underwater mortgages and foreclosure continue in most-at-risk counties
Major home ownership costs (mortgage payments, property taxes and insurance) on median-priced single-family homes consumed more than 30 percent of average local wages in 27 of the 50 counties that were most vulnerable to market problems connected to the virus pandemic in the third quarter of 2021. The highest percentages in those markets were in Rockland County, NY (outside New York City) (54.8 percent of average local wages needed for major ownership costs); Monmouth County, NJ (outside New York City) (45.7 percent); Passaic County (outside New York City), NJ (43.9 percent); Beaufort County (Hilton Head), SC (42.5 percent) and Kendall County, IL (outside Chicago) (39.5 percent). Nationwide, major expenses on typical homes sold in the third quarter required 24.9 percent of average local wages.

At least 10 percent of mortgages were underwater in the second quarter of 2021 (the latest data available on owners owing more than their properties are worth) in 37 of the 50 most at-risk counties. Nationwide, 8.9 percent of mortgages fell into that category. Those with the highest underwater rates among the 50 most at-risk counties were Cumberland County (Fayetteville), NC (25.8 percent of mortgages underwater); Hardin County (outside Louisville), KY (25 percent); Kankakee County, IL (outside Chicago) (24.4 percent); Saint Clair County, IL (outside St. Louis, MO) (23.4 percent); and Madison County, IL (outside St. Louis, MO) (23.1 percent).

More than one in 2,000 properties had a foreclosure filing in the third quarter of 2021 in 36 of the 50 most at-risk counties. Nationwide, one in 3,019 properties had a foreclosure filing in Q3 2021. (Foreclosure rates have dropped about 80 percent over the past year amid a federal moratorium on lenders taking back properties from homeowners behind on their mortgages during the virus pandemic. The moratorium ended July 31 and foreclosures are expected to spike over the coming year.) The worst rates in the top 50 counties in Q3 2021 were in Jefferson County, NY (north of Syracuse) (one in 454 residential properties facing possible foreclosure); Cumberland County (Vineland) NJ (one in 548); Will County, IL (outside Chicago) (one in 676); Gloucester County, NJ (outside Philadelphia, PA) (one in 696) and Atlantic County (Atlantic City), NJ (one in 709).

Counties least at-risk concentrated in South and Midwest
Thirty-three of the 50 counties least vulnerable to pandemic-related problems from among the 570 included in the third-quarter report were in the South and Midwest.

Oregon had six of the 50 least at-risk counties, including two in the Portland metropolitan area (Multnomah and Washington counties) and five in Texas, including two in the Austin area (Travis and Williamson counties). Also on the list of least vulnerable counties were Clay, Jackson and Johnsoncounties in the Kansas City, MO, area; Arapahoe and Denver counties in the Denver, CO, metro area; Dakota and Hennepin counties in the Minneapolis, MN area; Davidson and Rutherford counties in the Nashville, TN, area and Henrico and Richmond counties in the Richmond, VA, area.

Others among the top-50 least at-risk counties with a population of 500,000 or more included Maricopa County (Phoenix), AZ; Dallas County, TX; Mecklenburg County (Charlotte), NC; Wake County (Raleigh), NC; and Erie County (Buffalo), NY.

Less-vulnerable counties again have lower levels of unaffordable housing, underwater mortgages and foreclosure activity
Major home ownership costs (mortgage, property taxes and insurance) on the median-priced single-family home consumed less than 30 percent of average local wages in 36 of the 50 counties that were least at-risk from market problems connected to the virus pandemic in the third quarter of 2021. The lowest percentages among those counties were in Kenton County, KY (outside Cincinnati, OH) (15.8 percent of average local wages needed for major ownership costs); Potter County (Amarillo), TX (15.8 percent); Jackson County (Kansas City), MO (17.4 percent); Saint Clair County, MI (outside Detroit) (17.4 percent) and Madison County (Huntsville), AL (17.6 percent).

More than 10 percent of mortgages were underwater in the second quarter of 2021 (with owners owing more than their properties are worth) in only one of the 50 least at-risk counties. Those with the lowest rates in those counties were Chittenden County (Burlington), VT (2.6 percent of mortgages underwater); Williamson County, TX (outside Austin) (2.9 percent); Lane County (Eugene), OR (3.3 percent); Washington County, OR (outside Portland) (3.3 percent) and Marion County (Salem), OR (3.3 percent).

Those with the lowest foreclosure rates in the bottom counties were Arlington County, VA (no residential properties facing possible foreclosure); Cass County (Fargo), ND (one in 40,944); Olmstead County (Rochester), MN (one in 32,690); Marion County (Salem), OR (one in 31,553) and Imperial County, CA (outside San Diego) (one in 28,845).

Report methodology
The ATTOM Special Coronavirus Market Impact Report is based on ATTOM’s third-quarter 2021 residential foreclosure and home affordability reports and second-quarter 2021 underwater property report. (Press releases for those reports show the methodology for each.) Counties with sufficient data to analyze were ranked based on the percentage of residential properties with a foreclosure filing during the third quarter of 2021, the percentage of average local wages needed to afford the major expenses of owning a median-priced home in the third quarter of 2021 and the percentage of properties with outstanding mortgage balances that exceeded their estimated market values in the second quarter of 2021. Ranks then were added up to develop a composite ranking across all three categories. Equal weight was given to each category. Counties with the lowest composite rank were considered most vulnerable to housing market problems. Those with the highest composite rank were considered least vulnerable.

Source: https://www.witn.com/prnewswire/2021/10/21/illinois-new-jersey-delaware-have-most-markets-elevated-risk-pandemic-fallout/

Home buyers are paying more in closing costs, but it’s mostly because they’re paying more to buy a home. Lenders are actually holding their closing costs down, a new report shows.

National average closing costs for single-family properties was $6,837 including taxes, and $3,836 excluding taxes, for the first half of 2021, according to ClosingCorp, a residential real estate closing data firm. Closing costs were up 12.3% and 10.5%, respectively, year over year.

Refinance closing costs rose to $2,398, a 4.87% increase compared to 2020, according to ClosingCorp data.

ClosingCorp’s calculations include lender’s title policy, owner’s title policy, appraisal, settlement, recording fees, land surveys, and transfer tax.

“In the first half of 2021, buyers faced significantly higher home prices,” says Bob Jennings, CEO of ClosingCorp. In June, the average national price reached a new high of $373,664 and July marked the highest year-over-year gains, he adds. “Although the average home price increased by nearly $45,000, the closing costs, excluding taxes, on the property only increased by $400. In fact, closing costs as a percentage of purchase prices declined this year, going from 1.06% of the transaction in 2020 down to 1.03%. So, in addition to keeping up with high demand, the mortgage industry is doing a good job in holding down the costs it can control.”

The highest average closing costs, including taxes, for 2021 so far are in:

• District of Columbia: $30,352
• Delaware: $17,831
• New York: $17,582
• Washington: $13,910
• Maryland: $12,056

On the other hand, the states with the lowest closing costs, including taxes, are:

• Missouri: $2,102Origination: https://magazine.realtor/daily-news/2021/10/13/rising-home-prices-lead-to-105-hike-in-closing-costs

Real estate trends are always in flux. Here’s what you need to know about the latest happenings.

The housing market has been gaining strength in the last few years — particularly during the COVID-19 pandemic. Home values soared, buyer demand jumped, and mortgage rates hit historic lows. And ultimately, it’s made housing one of the few bright spots during an otherwise difficult time.

But the housing market is always in flux, and real estate trends come and go. Throw in that this industry is highly localized, with different conditions in every city, state, and metro area, and you can’t bet on things staying stagnant for long.

Fortunately, understanding the fundamentals of the market can help you stay on top of all these changes. Check out some of those fundamentals below, and scroll down for the most up-to-date real estate trends of the month.

Real estate prices

House prices are influenced by a number of factors, including local buyer demand and the amount of housing supply that’s available for purchase. Generally speaking, high demand and low supply cause housing prices to rise.

Mortgage rates can also play a role since they impact demand. When rates are lower, there tends to be more interest in buying homes. When rates rise, demand might wane a bit.

At the national level, home prices have been rising for some time. As of the end of 2020, the median home price was just under $347,000. Home prices jumped 11% across 2020 alone.

Housing affordability

Affordability isn’t just a result of house prices. Incomes, inflation, and interest rates also play a role. So rising prices? They don’t always mean homes are getting less affordable. If rates are particularly low or incomes are increasing, homebuyers might actually be able to afford more house than they could have previously.

Fortunately, that’s exactly the scenario we’re seeing today. When factoring in rates, income trends, and inflation, consumer house-buying power was actually up 21% by the end of 2020.

Interest rates

Mortgage interest rates play a big role in the housing market, impacting demand, home prices, and affordability. They also fluctuate daily based on a whole slew of factors, including Federal Reserve policy, the bond market, investor interest in mortgage-backed securities, and, of course, inflation.

In early 2021, mortgage rates hovered around all-time lows, according to Freddie Mac. The average rate on a 30-year, fixed-rate mortgage was just 2.74% in January, up from 3.62% the year before and 4.76% a decade prior.

Housing inventory

Housing inventory — or the supply of homes that are currently available for purchase — is another important factor in the housing market, too. When inventory is low and demand is high, it creates a seller’s market. Home prices rise, bidding wars erupt, and sellers have the upper hand in negotiations.

If inventory is high, on the other hand, buyers tend to have the advantage. In a buyer’s market, there are more available listings than there are buyers to purchase them. This slows down price growth and makes the market less competitive overall.

As far as today’s inventory goes, supply has been very low in recent years, and the coronavirus pandemic only worsened things. With sellers leery about having strangers in their homes — not to mention loads of economic uncertainty — the number of for-sale listings plummeted in 2020, at one point reaching its lowest level ever recorded. Listings have since recovered slightly but still remain fairly low. It’s possible widespread vaccinations will help loosen supply constraints and get sellers back on the market, but, of course, only time will tell.

Delinquencies and foreclosures

Mortgage delinquencies and distressed properties like foreclosures and REOs are another part of the market to pay attention to, especially if you’re an investor. Both of these tend to rise in times of economic hardship. (Case in point: During the financial crisis over a decade ago, there were around 3.8 million foreclosures.)

Housing market cycles and crashes

Real estate, along with the overall economy, tends to be cyclical. There are booms and busts, and as we saw with the housing crash back in 2007-2008, some of these extremes can get pretty bad.

Fortunately, most experts don’t think we’re nearing another crisis just yet. Though the economy is in a recession, there are a few key differences in today’s housing market versus those of downturns past.

For one, property owners have record levels of equity. Between Q3 2019 and Q3 2020, homeowner equity jumped by $1 trillion, and according to recent data, a mere 3% of properties have negative equity. This equity protects borrowers in the event their homes lose value, giving them a sort of buffer if the market turns.

Lending standards are also stricter than they once were, so homeowners likely have fewer debts and better credit profiles; overall, they’re more financially equipped to handle the mortgages they’ve taken out. On top of all this, there are low interest rates to consider. The Federal Reserve has committed to keeping the federal funds rate around zero until at least 2023. This should keep mortgage rates low and housing demand high for the foreseeable future.

 

Now that we’ve got those housing market basics out of the way, let’s dive into some more recent trends we’ve been seeing on the ground. Here’s what’s happening in the real estate market in October 2021.

1. Rents are skyrocketing

If you’re a landlord, it’s good news all around. The eviction ban finally ended, and rents are at record highs. According to Realtor.com, they jumped by 11.5% between August 2020 and August 2021, marking the first double-digit increase on record. Rents are even more expensive than starter homes in many American cities.

The average rent for the month clocked in at $1,633, up $169 a month. Two-bedroom apartments saw the biggest jump, at 12.3% over the year. Those rents now hover just under $1,830 per month.

2. Buying activity is slowing down

It seems competition is finally starting to wane. It might be the start of school, the threat of rising mortgage rates, or maybe buyers are finally getting burned out on the market. Whatever it is, it’s seeming easier to buy a home these days.

Existing home sales are down 2% for August, the first decline in over a year, and overall sales fell 6%. What’s more? The bidding war rate is the lowest it’s been all year. Currently, just over half of all buyers face a bidding war.

3. Home prices continue on their tear

Don’t let that dwindling competition fool you. Just because some buyers are stepping back doesn’t mean homes aren’t selling. They definitely are — and often at a premium.

According to the most recent House Price Index from the Federal Housing Finance Agency, national home prices are up over 19% as of July compared to last year. Between June and July alone, they rose 1.4%.

Homes in the Mountain division of the Census — which includes Arizona, Colorado, Utah, Idaho, New Mexico, Montana, Nevada, and Wyoming — saw the biggest jump in prices. Those are up a shocking 25.6%.

4. Foreclosures are rising

The foreclosure moratorium is officially in the rearview, and lenders acted fast. According to ATTOM Data Solutions, August saw a 27% jump in foreclosure filings — and that’s just compared to July. Over the year, they rose 60%.

Foreclosure starts were highest in California, Texas, Florida, Illinois, and New York, while New York, Chicago, Los Angeles, Houston, and Dallas topped the list of metros. If you’re a house flipper on the hunt for distressed properties, these should be the first places you look.

5. Mortgages are getting easier to come by

The Mortgage Bankers Association shows the mortgage credit availability is up, with a 3.9% increase between July and August. This essentially indicates the lending standards are loosening, making it easier to get a mortgage loan.

Credit availability is up the most on jumbo loans, which typically come with some of the most stringent qualifying standards. Conventional loans also saw a notable jump.

If that weren’t enough to get investors excited, there’s one more bit of mortgage-related news that might help. A few weeks ago, the FHFA announced it was rolling back policies that limited Fannie Mae and Freddie Mac‘s purchases of investment property loans. This should result in lower rates and fees on those mortgages moving forward.

The bottom line

The housing market is always changing. Be sure to check back in November for the latest trends and happenings in real estate.

Origination: https://www.millionacres.com/real-estate-market/real-estate-trends/real-estate-trends-guide/

Over the next few weeks and months, the long-overheated U.S. housing market is expected to continue to cool off in the bracing chill of autumn.

After a wild year of unprecedented price increases, a worsening shortage of homes for sale, and cutthroat bidding wars where offers six figures over the ask price weren’t uncommon, conditions are finally normalizing. More homes are expected to go up for sale this season just as many would-be buyers are either priced out or so fed up after losing out on home after home that they’re dropping out of the running.

“The fever in the housing market has broken,” says Ali Wolf, chief economist of building consultancy Zonda. “There have been buyers that have just been beat down for the last six months—and after losing so many homes and going through the emotional roller coaster, they’ve decided to stop searching for now. There are more homes on the market than there were six months ago.”

During the COVID-19 pandemic, record-low mortgage interest rates, below 3%, helped many homebuyers to absorb prices that reached all-time highs in the spring and summer. But prices rose so high so quickly that even bargain mortgage rates couldn’t offset them enough to give buyers some needed financial relief.

With more folks sidelined, some of the steam has been let out of the market. Prices aren’t rising by as much as competition is down and homes are taking a little longer to sell, giving buyers some breathing room.

In September, the rate of year-over-year growth was halved, to 8.6%, down from its peak of 17.2% in April, according to Realtor.com® data. This means the median list price of a home grew half as fast as in the spring. Homes also took a bit longer to sell, at about 43 days. While that’s down 11 days from the same month last year and 22 days from 2019, it’s up 6 days from June.

“Things are settling down. There will still be some multiple offers, but it will be less tense,” says Lawrence Yun, chief economist of the National Association of Realtors®. He expects the days of homes receiving 20 to 30 offers are becoming a thing of the past. “And some homes are lingering on the market for a week or two without an offer.”

This fall, buyers may once again be able to include contingencies in their offers, such as requiring home inspections and appraisals, and still win out bidding wars. They may even—gasp—get homes at the list price.

All-cash offers could also dip if buyers don’t need to cash out their savings, stocks, and cryptocurrency stashes to stand out from the competition.

“It’s not like the market is soft,” says Yun. “It’s just moving away from that extreme frenzy.”

The changes in the housing market may be coinciding with the seasonal slowdown. Typically, competition is fierce in the summer as families battle over larger homes in the suburbs, hoping to secure residences and settle in before the kids start school. Then the market slows down with less competition for the smaller homes that traditionally go up for sale.

Yun expects annual price increases will slow to a more normal level, around 5%, versus the double-digit price hikes that reigned earlier in the year. But this may not be true for every home in every part of the country.

“If you want a reasonably priced home in a desirable area, be ready to still face stiff competition,” says Zonda’s Wolf.

Will home prices fall?

The question on the minds of sellers, buyers, homeowners, and just about everyone else is whether prices might actually fall. Sorry, buyers, that likely won’t happen anytime soon.

The nation is still suffering from a severe housing shortage resulting in more buyers than there are abodes for sale. This is a continuing hangover from the Great Recession’s aftermath, when builders largely held off on building while investors bought up single-family homes and turned them into rentals. Meanwhile, the millennial generation is larger than the previous one, meaning there are more prospective buyers than there were a decade or so ago.

There’s plenty of pent-up demand for homes.

“You’ve still got a lot of young people who have still not bought a home but who would like to,” says Realtor.com Chief Economist Danielle Hale. “Anytime the market starts to cool, you’ve got people on the sidelines waiting for their chance to get in. That keeps both home sales and home prices from declining too much.”

She expects more homes to hit the market in October and through the end of the year. But it won’t be enough to ameliorate the problem of demand.

The nation is still short about 5 million homes, Hale says. As builders can’t get them up fast enough, she expects it will take between five and six years before there are enough homes for sale to meet demand.

New construction is beginning to pick up after months of builders contending with shortages in lumber, labor, materials, and appliances. While there are still delays compared with before the pandemic, there was about a 5% uptick in construction in August compared with July, says Zonda’s Wolf.

“Inventory is still very, very tight,” says Wolf. But “we’re up from the bottom. We expect to see a little more inventory trickle onto the market through the end of this year and into next year.”

Rising mortgage rates will likely keep high prices under control

Rising mortgage interest rates are expected to keep price growth in check: After all, buyers can afford to fork over only so much for their monthly housing payments. So if rates rise, buyers won’t be able to afford more expensive properties.

This could result in lower price growth, or prices going flat or even dipping a little in certain markets.

“Once mortgage rates push up a little bit, it’s going to combine with higher home prices to price people out of the market,” says Mark Zandi, chief economist of Moody’s Analytics. “Some markets could see prices go down a little, like in the most juiced markets. … [But] it’s not a crash.”

Rates are expected to top 3% by the end of the year and reach 4% by the end of 2022, says Joel Kan, an economist at the Mortgage Bankers Association. They averaged 2.88% for a 30-year fixed-rate loan in the week ending Sept. 23, according to the most recent Freddie Mac data.

Historically speaking, even 4% is still low. Over the past 20 years, mortgage rates averaged about 5%, according to MBA. The difference between a 3% and a 4% rate on a $380,000 home (the median list price nationally) was about $169 a month on a 30-year fixed-rate loan. That adds up to nearly $61,000 over the life of the loan.

“We’re expecting rates to increase moderately over the next 12 months,” says Kan. “As the economy improves, as the job market improves, typically that pushes rates higher. [But] there is a little bit more uncertainty now, given that we’ve seen the pandemic linger longer than we expected.”

How will the fall market affect home sellers?

While experts predict the housing market will remain firmly in the seller’s court, the days of picking prices out of thin air are likely coming to an end. The same goes for not making any improvements to a property (let alone having it properly cleaned) before listing it.

“Some sellers got a little too greedy or had a misconception about the market conditions,” says NAR’s Yun.

Zonda’s Wolf recommends sellers look at comps of other homes in their neighborhoods that have recently sold to get a realistic idea of what they can charge for their properties. They should also get their homes in tiptop shape. And while they may not get 20 offers like their neighbors may have received a few months ago, well-priced, move-in ready homes are in high demand.

“If you’re a seller today, you’ll likely still get top dollar, but you’re still going to have to put in the work,” adds Wolf. “Dust for cobwebs, stage the home, put on a fresh coat of paint.”

Origination: https://www.realtor.com/news/trends/is-housing-market-frenzy-going-to-cool-off-this-fall/