MReport September 2021

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M REPORT | 55 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 DATA Weighing Risks, Rewards of Renting Out a Home As the cost to lease exceeds average mortgage payments in 30+ metros, some homeowners investigate the potential benefit of becoming a landlord. I n many major metropolitan areas across the country— places including Miami, Atlanta, Memphis—rents are higher than typical mortgage pay- ments. In fact, as the the price of real estate appreciated at stagger- ing rates over the past year, rent price growth recovered and now has "sped past what levels were projected to have been based on pre-pandemic trend," according to Zillow's latest rental market report. That has left 33 of the 50 largest metropolitan areas with typical rents that are higher than typical monthly mortgage pay- ments, including insurance and taxes, Zillow reported. Meanwhile the company has introduced tools, including a return-on-investment calculator, which they say make it simpler for would-be landlords to determine what it would take for them to rent out their property and to weigh the pros and cons. The ability to work from home has severed or seriously stretched the commute for millions of Americans and opened up new opportunities for them to live where they like. A recent Gallup poll found 52% of U.S. workers are in at least partially remote jobs, while 33% are fully remote. At the same time, market conditions have created a need for homes and, for some homeowners who may have struggled financially during the pandemic, a need to find extra income without having to sell their home. "For homeowners looking to explore life in a top metro for digital nomads or favorite vacation town without selling their current house, renting can open the door," pointed out Amanda Pendleton, Zillow Home Trends Expert. Property owners who rent out their home for more than their monthly mortgage payments can use the difference for traveling, catching up on bills postponed during a pandemic, or savings, Zillow's authors note. And they also would be entering a market with high demand for the product they are peddling. "Single-family homes comprise about one-third of the nation's to- tal rental stock," Zillow Economist Alexandra Lee said. "Owners who do rent out their properties can provide both much-needed rental inventory in tight markets as well as sought-after space and amenities for families looking to move up from an apartment." Zillow pointed out that its new Rental Property Calculator is designed to help independent landlords determine if their pro- spective purchase makes financial sense. As the Zillow literature reads, "a rental property can be a profit- able real estate investment if you understand the risks involved as well as the potential return on investment (ROI). Our rental property calculator looks at the upfront investment costs, expens- es, and earnings to calculate the ROI. Simply adjust the sliders on the calculator below to customize the financial details." The calculator factors in property price, home appreciation forecasts, expected rental income, mortgage rates, and more to find when the purchase will break even and begin to pay itself off. Price Drops Indicate Increasing Buyer/ Seller Balance While the housing market will not return to a fully typical state anytime soon, it is "starting to trend in that direction," economists say. I n further signs of a slightly cooling market, the share of homes with price drops has now passed the 5% mark, according to a Redfin report. The research team there reports that this is the highest level this metric has reached since 2019. This time of year, the price drop level typically remains flat, however Redfin reports it is climbing. While something to keep an eye on, economists say the market still very much favors the seller. Home prices are still rising, and homes are selling very quickly, just slightly slower than before. Homebuying demand remains strong; however, home sellers can still overprice their homes, and those that go a week or two on the market without any bids are adjusting their asking prices accordingly, Redfin Chief Economist Daryl Fairweather said. "The housing market is less hectic than it was in early spring, but it's still far from typical. The move to a less imbalanced market is happening slowly," Redfin Chief Economist Daryl Fairweather said. "As we approach the beginning of back-to-school season, home prices typically cool, sup- ply winds down, and homes take longer to sell. All that's happening, just very slowly. I don't think the housing market will return to a fully typical state anytime soon, but we are starting to trend in that direction." Highlights from Redfin's market report, which covers a four-week period ending August 15: » The median home-sale price increased 17% year over year to $361,973, a record high. » Asking prices of newly listed homes were up 10% from the same time a year ago to a median of $353,347, the lowest level since mid-April. This is down 2.2% from the all-time high set during the four-week period ending June 27. » Pending home sales were up 10% year over year, the smallest increase since the four-week period ending June 28, 2020. Pending sales were down 7% from their 2021 peak during the four-week pe- riod ending May 30. » New listings of homes for sale were up 3% from a year earlier. The number of homes being listed is in a typical seasonal decline, down 7% from the 2021 peak during the four-week period ending June 27, compared to a 13% decline over the same period in 2019. » Active listings (the number of homes listed for sale at any point dur- ing the period) fell 24% from 2020—the smallest decline since the four-week period ending October 25, 2020—and have climbed 15% since their 2021 low during the four week period ending March 7. » Homes that sold were on the market for a median of 18 days, up from the all-time low of 15 days that had held for four weeks in late June and July, and down from 35 days a year earlier. » The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, decreased to 101.8%. In other words, the average home sold for 1.8% above its asking price. This measure is down 0.5 percentage points from its peak during the four-week pe- riod ending July 11, and up 2.7 percentage points from a year earlier. » From January 1 to August 15, home tours went up 14%, compared to a 43% increase over the same period last year according to home tour technology company ShowingTime.

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