About 16.1% U.S. home contracts fell through in July, up from 15% in June and 12.5% a year earlier. Of the top 10 city backout rates, 6 were in Fla., with Jacksonville No. 1.
Nationwide, roughly 63,000 home-purchase agreements fell through in July, or 16.1% of homes that went under contract that month, according to a report from Redfin. It’s up from a revised rate of 15% one month earlier and 12.5% year-to-year.
An increase in backouts can reflect a changing market. Some buyers who started their search a few months ago may no longer qualify for a mortgage high enough to cover their purchase. Some frustrated buyers may have made a quick decision and then regretted it as more listings come into the market. And some buyers may feel they’ve gained more power after a seller refused to negotiate requested changes.
Florida is home to many of the cities seeing buyers back out, holding six of the top 10 spots in Redfin’s study. Jacksonville held down the No. 1 spot, with buyers backing out of just less than a third (29.3%) of all contracts.
Top U.S. cities where buyers backed out
Jacksonville – 29.3% of homes under contract
Las Vegas – 27.4%
Lakeland – 26.2%
New Orleans – 25.9%
San Antonio – 25%
Orlando – 24.5%
Palm Bay – 24.5%
Deltona – 24%
Atlanta – 23.7%
“Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate. They’re asking for repairs, concessions and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better,” says Heather Kruayai, a Redfin real estate agent in Jacksonville. “Buyers are also skittish because they’re afraid a potential recession could cause home prices to drop. They don’t want to end up in a situation where they purchase a home and it’s worth $200,000 less in two years, so some are opting to wait in hopes of buying when prices are lower.”
Alexis Malin, another Redfin agent in Jacksonville, warns buyers that there’s no guarantee they’ll be able to find better deals in the future. Annual home-price growth has started to slow – to 8% today from 17% a year ago – but prices are still on the rise and Redfin economists don’t expect them to crash.
“Some buyers who are backing out of deals have this mindset that the market is crashing and they’ll be able to get a home for $100,000 less in six months. That’s not necessarily the case,” she said. “Homes in many parts of Florida are still selling for a pretty penny, so I warn my buyers that the grass might not actually be greener on the other side.”
Some buyers may also be backing out due to 5%-plus mortgage rates. Those who started their search months ago, when rates were closer to 3%, may be realizing the type of home they wanted before is now out of budget since monthly mortgage payments have soared nearly 40% year over year.
“Home-purchase cancellations may begin to taper off as sellers get used to a slower-paced market,” says Redfin Deputy Chief Economist Taylor Marr. “Sellers have already begun to lower their prices after putting their homes on the market. They’ll likely start pricing their properties lower from the get-go and become increasingly open to negotiations.”
“The last four buyers I’ve worked with have all backed out of deals,” Malin said. “One of my clients asked the seller for money to cover the home being repainted. The seller said no at first, so my buyer canceled the contract, but the seller then changed their mind and repainted the whole house. My buyer still walked away because he decided he didn’t love the home that much after all and he knew he had other options.”
Assisting buyers, sellers and investors in general in the sale-purchase transaction of residential and commercial Real Estate. Specializing in single family homes, waterfront properties, highrise condominiums, foreclosure and short sale property transactions. I also have the designation C.I.P.S. ( certified international property specialist ) that give me the advantage to assists investors from all over the World to buy a piece of property in Florida.
Some renters saving for a down payment and unable to buy find that recent rent increases are eating away at savings and forcing them to stay where they are.
Christine Rodriguez decided to extend the lease on her rental trailer home in Des Moines, Iowa, last month, after spending more than a year trying to buy a starter home.
Under the renewed lease, however, she’ll pay 13% more in rent over the next year, with her payment going from $1,200 to $1,350. And with prices also rising for essentials like food, electricity and gas, her monthly expenses will go up from $1,600 to $2,000.
Rodriguez, a waitress in a sports bar, and her husband, Oscar, a construction worker, had been meticulously saving for five years to afford a down payment on a home in the $150,000-$220,000 range. But when they started looking early last year, they found the pandemic had upended the housing market, shrinking the pool of available homes and sending prices to historic highs. Intense competition and multiple bids have forced her to increase her budget for a new home. After starting in the $180,000-$215,000 range, she is now considering prices of between $210,000 and $230,000.
“We have no choice,” says the 36-year-old mother of six. “There are no homes out there. And our expenses are through the roof.”
Rodriguez is not the only one in this predicament. Many Americans are looking for houses but those shopping for entry-level or starter homes – those smaller than 1,400 square feet – are especially challenged.
Over the past 12 months, rents spiked by an unprecedented 18% nationally, according to Apartment List’s National Rent Report released in January. And housing costs saw a similar surge, with the median sales price of an existing single-family home rising to $364,300 in December 2021, up 16% from the same month a year earlier, according to the National Association of Realtors.
Why is the housing market so high right now?
For potential buyers of starter homes, the situation has gotten worse in the past year. Apart from contending with fewer and more expensive homes on the market, rampant inflation and rising mortgage rates further threaten to diminish their purchasing power.
Inflation rose by 7% over the past year, its fastest pace in nearly 40 years, and mortgage rates continued to tick up, putting affordability further out of reach for many.
Indeed, homes priced between $100,000 to $250,000 saw the volume of sales decrease by 23% in December 2021 compared with December of 2020, whereas homes sold in the over $1 million bracket went up by 38% in the same time period, according to data obtained from the National Association of Realtors by USA TODAY.
The data once again throws into sharp relief the divergent experiences of the haves and the have-nots that have defined much of the pandemic housing market.
“There’s plenty of buyer interest but no supply,” says Lawrence Yun, the chief economist for NAR. “The wealthy have enjoyed record highs in the stock market and accumulated housing wealth and can afford high-priced homes.”
One of the main drivers of the housing shortage is the decline in entry-level home construction, according to Sam Khater, chief economist for Freddie Mac. The number of starter homes under construction has declined significantly, from 40% of homes built in 1980 to 7% in 2019.
Tiffany Ehler, a real estate agent who has been working with Rodriguez, says in 2021, the Des Moines housing market saw its lowest inventory of houses for sale in 20 years.
“Since June of 2020, we have been in an inverted market where we have more houses pending than for sale,” she says. “And in 2021, home values increased by close to 20% instead of our usual 4 to 6%.”
Ehler says that either homes have been too expensive for Rodriguez or the house sells too fast.
“It was gone before we could schedule a showing, like, sometimes just later that day,” she says. “And if we went to see one … that she liked, it was gone by the time her husband could see it.”
The missed opportunity to buy a home can have long-term financial consequences and contribute to major disparities in wealth, according to an analysis by the Urban Institute.
For instance, those who bought their first home between the ages of 25 and 34 have the greatest housing wealth, accumulating close to $150,000 in median home equity by age 60, according to the report. People who bought between the ages of 35 and 44 had $72,000 less in home equity by 60, and those who wait until they were 45 or older lost more than $100,000 in median wealth.
“Homeownership has always been the best way to build wealth, and if you can’t grab onto that ladder, you don’t have that opportunity,” says Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute. “My advice would be to, if you can stretch to buy a home now, you should do so because of the long-term opportunities to build wealth.”
Because of the supply and demand imbalance, the likelihood that home prices go down is low, Goodman says.
And that makes trying to buy something crucial, especially with the rental market rising.
“When you enter the housing market, you lock the bulk of your housing expenses with a mortgage,” Goodman says. “In a world with rising inflation, that’s very, very valuable. You are also looking at a couple of years of hefty rent increases, which is only going to make it harder to save for that home.”
Jonathan Weldon is living that reality. Last July, Weldon, a youth pastor, moved with his family from Shreveport, Louisiana, to Georgetown, Texas, some 25 miles north of Austin when he started a new job at a church there.
In Shreveport, he had been able to sell his 2,300-square-foot house in less than a week for $2,000 more than asking. Over the past six months in Austin, where home prices have gone up by 30% in 2021, he’s lost several bids to people offering more than $30,000 above asking on homes priced around $250,000.
Meanwhile, rents are up by 40% in Austin, according to Redfin.
After staying at a church friend’s home for a few months, Weldon is now paying $1,475 to rent a duplex townhouse, more than what he was paying in mortgage on a larger house in Shreveport. A year ago, the rents in Austin for a similar place would have been closer to $1,000-$1,100.
“It’s tough because the last thing I want to do is pour money into something that I’m not getting any return on. I really did not want to rent at all,” he says. “If you’re going to stay somewhere longer than two or three years, you need to be building equity, and we’re not doing that right now.”
Chris Lefforge, a Redfin agent who has been working with Weldon, calls it “a perfect storm.”
“We have a whole bunch of new people moving here from all around the country, and we’ve got about 29 days of inventory. A balanced market would be about six months of inventory,” he says. “In addition, we’re also having competition, not just from other first-time buyers, but also investors trying to buy up all the properties that they can, especially in the lower price range.”
While starter homes tend to be in the $250,000 range and remain the most competitive, the sales of the most affordable homes (median sale price of $127,500) rose 11% year over year in the fourth quarter of 2021, according to Redfin. This is likely due to a few trends, including investors buying up properties that are fixer-uppers, workers earning more as the economy strengthens and the end of mortgage forbearance causing some homeowners to list their homes, says Daryl Fairweather, the chief economist for Redfin.
“We’re seeing an increase in listings of the most affordable homes now because those are owned by people who are likely lower income, more likely to have been laid off during the pandemic and more likely to have missed payments,” she says. “Since the market is so strong, people who are behind on their mortgages might think it’s a good time to cash in and list their homes.”
Home prices rise out of her range
When Alexa Erb, 27, found a new job at Boston University last month working on diversity and inclusion initiatives, she enrolled in a course for first-time homebuyers. Her current role at Bentley University in Waltham, Massachusetts, comes with free on-campus housing, and Erb says she’s hoping to buy a condominium when she takes up her new job next month rather than pay rent.
“I have had the privilege of free on-campus housing for the past couple of years and saved up for a down payment. I want to build some of that social and cultural capital that comes with purchasing a home,” adds Erb, who is looking for something in the $300,000 range but acknowledges, “There’s very little in my price range.”
That hasn’t stopped Erb from putting in three offers in the past three weeks.
“The first one, I put in an offer a couple of thousand dollars over asking,” she says. “And was very clearly beat out by one of the other 30 people who were at the open house and had the means to offer something even higher than I could.”
But Erb says she’s determined and plans to sign a short-term rental lease, perhaps an Airbnb, until she finds a place of her own.
“I think that it is a really important way to set myself up,” she says. “Buying my first home feels appealing knowing that my money is going towards something.”
A Florida Realtor can help you navigate one of life’s most important decisions.
A home is one of the largest investments you’ll ever make. And when it’s where you live, the buying or selling decision often is as much of an emotional investment as a financial one.
A professional Realtor can help you at every step along the way.
Why hire a Realtor?
Florida Realtors are trained professionals.
They know how to match the right buyers to the right home, and how to market homes to the right buyers
As members of the National Association of Realtors, they follow a Code of Ethics.
1. Realtors abide by a code of ethics.
While we believe most real estate professionals are honest folks, those who belong to the National Association of Realtors (NAR) have agreed to conduct themselves according to the Realtor Code of Ethics, 17 rules that ensure standards of practice to promote honesty and fairness.
What this means is that your Realtor is looking for you – and only you. Plain and simple.
2. They have insider information.
Every industry has its own special language, its own vast networking system, its own trade secrets, and the world of real estate is no different.
Realtors network constantly with other real estate pros and have exclusive access to market data through the National Realtors Association that help them keep up with what’s happening in the housing market. They know the trendy subdivisions and the up-and-coming blocks, and they watch like hawks to find great deals for buyers.
Realtors know CMAs, EIKs and FSBOs. Amortization, appraisals and assessments. Collateral, co-mingling and cash reserves. If you don’t understand this lingo (and most people don’t), consider getting a Realtor on board to help you translate.
They also know that advertising isn’t what sells most homes, it’s networking.
Using a Realtor to buy or sell your home gives you access to his or her extensive contact list of colleagues as well as friends, family and previous clients. Your Realtor could know another Realtor who knows a family that’s looking for exactly what you’re selling or who’s selling just what you’re in the market for.
It’s these relationships with other real estate pros that can help you get a fair representation of the property as well as the best final sales price, whether you’re buying or selling.
3. They’re marketing masters …
In addition to marketing behind the scenes with colleagues, Realtors know how to make your home shine — from planning the perfect open house to staging your home for showings to photographing your property in the best possible light (literally) for listings.
We know you have good taste and that HGTV has taught you a thing or two about selling a home. But we also know you have a full-time job, a family and a hundred other things on your to-do list. It’s perfectly OK to take the back seat and let a pro handle your real estate venture.
Truth is, 30 percent of buyers found their home with the help of an agent and 51 percent found theirs on the internet, according to a 2017 National Association of Realtors (NAR) survey.
Realtors have made it their job to build huge social media followings, and their association with the NAR provides them with all the latest marketing strategies. They network through things such as Facebook groups, NextDoor and LinkedIn to reach even more potential buyers and sellers.
You, as a homeowner, can only share your listing so many times with your Facebook friends before they snooze you for 30 days.
4. … and tough negotiators.
It’s all about that final price, and for sellers, the idea of handing part of that to an agent can feel a little unsettling.
Consider this: The average selling price for a “for sale by owner” home was $208,700 compared with $235,000 for an agent-assisted sale, according to 2016 numbers from NAR, which points up that the odds of getting the price you want (and maybe even more), increase when you have a seasoned expert at your side.
And a bigger profit means you can still walk away with the cash you hoped for.
Plus, Realtors aren’t emotionally invested in your property. And that’s a good thing, because more than likely, you are. Your home holds memories, good and bad, and letting go can be a heart-wrenching process.
Human beings simply don’t make the best decisions when they’re emotional. A Realtor can be a common-sense constant who negotiates with his head instead of his heart.
5. Realtors keep you on the right side of the law.
Do you have to tell a potential seller about that water leak you never had repaired? Do you need to test your older home’s paint for lead before putting it on the market? Are there any deed restrictions on the property you’re hoping to buy? Who the heck is Dodd-Frank?
When buying or selling a home, dozens of questions will come up that you simply won’t know the answer to — and an internet search won’t quickly answer. This is where a Realtor comes in particularly handy.
Realtors keep up with the ever-changing rules and regulations that govern the sale of property, thanks to a constant flow of up-to-date information from the National Association of Realtors and related state Realtors associations, so you don’t have to.
Fort Lauderdale Marine Center, the largest marina in United States of America, located in River Oaks, Fort Lauderdale, Florida.
If you plan to purchase a residential property in that neighborhood or surrounding areas, please send me an e-mail to:
AngelFloridaRealtor@gmail.com
Angel Calzadilla, realtor
Coral Shores Realty
#FortLauderdalehomes #waterfrontproperties
A recent admission by Saikat Chakrabarti, chief of staff of Alexandria Ocasio-Cortez, on the highly publicized Green New Deal (GND) reinforces the view that socialists are using the environment to replace private property and free trade in the market with state control of the economy.
“Do you think it is a climate issue? Because we really think of it as a matter of how to change the entire economy. ”
Others who have highlighted the anti-capitalist agenda that motivates climate alarmism include professors Joshua Goldstein and Steven Pinker, who, in an article in the Boston Globe, said that Progressives were using the fight against climate change to drive great government action on a long list of »social ills such as inequality, corporate greed, racism and political corruption… Naomi Klein’s campaign to ‘change everything’ projects global warming as an opportunity for the left to intensify its various crusades. ”
The Fed lowered rates by a quarter of a percentage point Wednesday, for the third time this year, in an 8-2 vote. Citing “global developments for the economic outlook as well as muted inflation pressures” in a statement released by the Federal Reserve, policymakers dropped the target range for the federal funds rate to 1-1/2 to 1-3/4 percent.
The mortgage holders that will benefit from the rate cut are those with adjustable rate mortgages or ARMs, as a Fed cut means another reduction to their mortgage bill. Variable rates usually move in the same direction as the federal funds rate. The federal funds rate, however, doesn’t directly affect long-term rates, which include financial products like 30-year fixed-rate mortgages; those tend to move with long-term Treasury yields.
“Fed rate cuts have very little direct correlation to long-term fixed mortgage rates. We have seen mortgage rates moving in the other direction of the rate cut or not moving at all in the past,” says Shashank Shekhar, CEO of Arcus Lending in San Jose, Calif. “However, in the short term, a Fed rate cut usually boosts the stock prices and takes the money away from bonds. Also, a rate cut is intended to increase economic growth which can be inflationary. All of this is usually bad for mortgage rates and could result in higher rates for the borrower in the immediate future.”
How Fed Rate Affects Short-Term Loans
Most variable and short-term rates are linked to two benchmark rates: the prime or the London interbank offered rate (LIBOR) plus a margin, which is a number of percentage points. These rates usually march in step with the federal funds rate, so today’s rate means an extra jingle in some borrowers’ pockets.
One thing to note is that LIBOR as the key rate in mortgage contracts is on its way out, which is important for consumers to keep an eye on. Loans might get more expensive once LIBOR is replaced, says Greg McBride, CFA, Bankrate chief financial analyst.
“The future for many adjustable-rate mortgages is further clouded by the coming demise of LIBOR as a loan index. There is an open question as to whether the replacement index and margin will mean a higher rate for borrowers than the current LIBOR plus margin,” says McBride.
Addled with credibility issues, largely due to manipulating rates in order to drive profit, LIBOR will likely be replaced by risk-free rates or RFRs. The major flaw in LIBOR is that it depends on empirical data, which means banks report rates without being required to provide numbers to back up their claims. This process led to some LIBOR banks underreporting their interest rates for profit, which meant higher loan prices for some borrowers.
Unlike LIBOR, RFRs would promote transparency by calculating rates based on real transactions in the market.
What ARM Borrowers Should Know
Variable-rate loans, such as 3/1 and 5/1 ARMs, as well as home equity lines of credit, or HELOCs, get more or less expensive as the Fed boosts or lowers rates. This can be a boon for borrowers or a drain on their wallets, which makes variable-rate loans a sometimes-risky pProducts like 5/1 ARMs give consumers the first five years with a fixed rate; after the fixed-rate period ends, there are annual rate adjustments for the remainder of the loan. So, if your rate drops during the adjustment period, the cost of your ARM drops, too.
Many HELOCs are also variable-rate loans, which means a win for borrowers in a falling rate environment.
The problem is that rates don’t always drop. So, it’s important for borrowers to analyze all scenarios: how much they’ll spend as well as how much they’ll save if rates rise and fall. It’s important to ask yourself: Can I afford my mortgage payments if rates spike? Although your initial out-of-pocket payment will likely be lower with an ARM, that low cost might not last if rates rise.
“My brother and sister-in-law have a 5/5 ARM with a great rate and a low down payment. But, if rates go up in five years, their payment might go up by a couple hundred bucks a month. That’s a big increase,” says Sean Murphy, associate vice president of Equity Lending at Navy Federal Credit Union.
A 5/5 ARM is a 30-year adjustable-rate mortgage with a principal and interest payment that stays the same for the first 60 months, and after that, the interest rate could rise or fall every five years.
Often borrowers choose ARMs to get the lowest initial rate possible, regardless of the variable-rate risk. This can be a cost-saving strategy if the borrower is certain they’re going to sell before the fixed-rate period ends or can refinance into another mortgage.
For borrowers who plan on staying put or might not be able to refinance later (due to credit or employment issues, for example), that upfront cost savings likely isn’t a worthwhile gamble.
“There is only about one-quarter percentage point difference between the rate on a 7/1 ARM and a 30-year fixed. For a quarter percentage point, are you going to subject yourself to potentially higher rates seven years from now? You’ve got to be awfully certain you’ll be out of that house within seven years to make that risk pay off,” McBride says.
Consumers May Want to Keep an Eye on These Indicators
The Fed’s decisions on rate movement are often influenced by several economic factors, which consumers can easily track. Employment, inflation and consumer price index are essential data the Fed considers when deciding what to do with rates. One thing consumers may want to look at is the employment report, which is published monthly by the Bureau of Labor Statistics.
The target inflation rate is another yardstick for rate changes. Currently, inflation is still dipping just below the Fed’s target 2 percent rate, which—in concert with other economic trends—could nudge the Fed toward future rate cuts.
As long-term rates hover below 4 percent, many borrowers are in a good position to save money.
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