MReport August 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 41 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Bidding Wars Ramping Up What caused more than half of offers made in June to face competition? R edfin reported that more than half of its offers faced competition in June. Specifically, 54% of home offers placed by the real estate agency's representatives faced bidding wars. This marks the second consecutive month that the bidding-war rate for new home purchases has been on the rise. This competition can be attrib- uted to the continued tightening and limited supply of homes for sale, as well as the steadily plummet- ing mortgage rates now available for home loans. Among these bidding wars, Redfin Realtors report that many included multiple bids versus just two hopefuls vying for properties. Also, single-family homes and townhouses were reported as being far more likely than condos to receive these mul- tiple bids. Some might be surprised by this activity, especially considering COVID-19 spreading across the nation, and the unpredictable and hard-hit economy that comes has arisen as a result. Redfin Economist Taylor Marr commented on this almost surreal state that the housing industry now finds itself within: "Bidding wars continue to be fueled by historically low mortgage rates and fewer homes up for sale than almost any time in the last two decades. It's like a game of musical chairs where only the best bidders get a seat. Both renters and move- up buyers who have held onto their jobs are vying for the small number of single-family homes on the market as they realize they need more space for their families." Regarding these afore-men- tioned low mortgage rates, Redfin revealed that the average mortgage rate fell to 3.03% for the week ending July 9, marking the lowest 30-year fixed-rate ever recorded. As for the homes available for sale nationwide in June, that figure dropped 21.3% from just one year ago, marking its lowest level since at least 2012 (seasonally adjusted). Also of note is that the metro areas of Boston, San Diego, and Salt Lake City were revealed to be the most competitive markets at the moment. Boston Redfin agent James Gulden commented on what he sees occurring in his local market: "This is the most competitive real estate market I can remember. There are multiple bids on nearly every property I see whether I'm representing the buyer or the seller. I'm seeing the most competitive in the suburbs, where homes are selling in a matter of days. Sellers don't want homes to be on the market any longer than necessary because of COVID-19, so they're setting offer deadlines, which create a frenzied, competi- tive atmosphere." Homebuyers Growing 'Frustrated' Here's what is causing angst amongst prospective homeowners. R edfin data reveals that June ended with the housing market on somewhat shaky ground, with pending sales having pulled back slightly as summer nears. For the last week of June, pending home sales decrease of 8.2% annually. This represents a 5% increase from the prior week's 3.9%. However, compared to the same week of June 2019, this is an 8% decline. New listings are also down 8% from this time last year. However, even with near-record low rates, those applying for mortgage ap- plications decreased by 2% from the prior week. Other possible reasons for the pending home sales decline include the idea that many homebuyers may have been bid- ing their time during March and April and are now only making actual steps to purchase. Another possible cause for the decline is that it is directly linked to the current shortage of homes avail- able in the U.S. Redfin Houston agent Irma Jalifi commented on the current shortage: "Homebuyers are be- coming frustrated because they're just not seeing a lot they want to buy. The lack of homes for sale has caused two of my buyers to just give up when they had been trying to find a home before their leases were up at the end of July. It's disappointing to spend so much time and effort and come up empty-handed." Two main questions remain for the market: Will sellers soon return to the market? And will homebuyers' confidence remain— or even strengthen—as the market continues to recover? As the economy slowly continues to heal, one can hope. But if lockdowns return and restrictions begin to tighten once more, home sales and listings may follow suit. "This is the most competitive real estate market I can remember." —James Gulden, Boston Redfin agent

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