Real Estate News
By: Real Estate Hotline
Fall 2021 (Vol. 39, No. 3)
According to the National Association of Realtors, the residential real estate market is cooling a bit compared to the red-hot summer months. This is normal for the time of year but Realtors report sales activity is also down a little from this time last year. Regardless, the median existing-home sales price climbed 13.3% year-over-year to $352,800, as prices rose in each region. That’s 115 straight months of year-over-year increases.
For a breakdown by region, the median price in the Northeast was $387,200, up 9.2% from one year ago. The median price in the Midwest was $265,300, a 9.1% increase from September 2020. The median price in the South was $307,500, a 14.8% rise from one year ago. The median price in the West was $506,300, up 8.3% from September 2020. Existing condominium and co-op sales were up 4.5% from one year ago. The median existing condo price was $297,900 in September, an annual increase of 9.3%.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 2.90 in September. That is a slight increase from 2.84% in August but lower than the average commitment rate in 3.11%. for all of 2020.
The inventory is edging a little higher but first-time buyers continue to struggle with low inventory, fewer days on the market and investors swooping in with all cash to win out over a buyer who needs to secure a mortgage.
Across the nation, on average, properties typically stayed on the market for only 17 days and sellers averaged more than four offers on their home sale. While buyers are still offering more than list price in most cases, that trend seems to be slowing as well. This could be a sign of the market cooling or it could be that sellers are listing higher to begin with. The problem with offering more than list price is that the home may not appraise for that much. All cash buyers can waive the appraisal but if you need a mortgage, the appraisal contingency is a requirement.
The share of non-primary residence buyers (vacation, investors) decreased to 13% (from 15% in the summer months; but up from 12% one year ago), with the decline due to fewer investors buying rentals (7%), while vacation home buyers held steady at 6% of the market.
More buyers purchased a property in a suburban, small town, rural, or resort area, 85% compared to 83% one year ago). However, only 31% jumped from the city to suburbia compared to 39% one year ago.
Q: I heard there is a new financing rule that will help spur condominium values. Can you tell me more about that?
A: You are probably referring to the new FHA condo rules. The start date of the new guidelines was actually October 15, 2019 but the market is just beginning to see the effects. The changes make it easier for home buyers to use FHA insured loans.
To allow FHA financing, every condominium project must be FHA approved. In the past, that meant, the entire condominium complex had to apply and be approved for FHA financing. Under the new FHA condo rules, instead of needing to get approval for the entire complex, the single unit for sale would follow the same approval process as a detached single family residence when the borrower applies for an FHA loan. Before this new change, only around 6.5% of the condominium projects in the United States were FHA approved.
Q: Is it still worth it for my condo complex to apply for overall approval?
A: Yes. Only around 7% of the condo projects in the United States are FHA approved. If a homebuyer is purchasing a non-FHA approved condo, they would need to pay all cash or at least 20 percent down compared to only 3.5 percent down payment for an FHA approved condo. So having FHA approval upfront could open the door for more potential buyers. One of the main obstacles in the past was that FHA required the complex to have less than 50 percent of the units owned by investors. But under the new rule, some condominium projects can have as much as 75% investor owned. The new guidelines also raise commercial space limits. The maximum total square footage used for commercial purposes increased from 50% to 60%. Also, the re-certification for condominium complexes changed from every two years to every three years.