Latest news with #DarylFairweather
Business Insider
8 hours ago
- Business
- Business Insider
Rate buydowns, negotiations, and nepo money: Here's how people are affording homes in today's market
With high mortgage rates and home prices, buyers are struggling. Some are getting creative with rate buydowns and negotiations. Other buyers are seeking down payment assistance from their parents. With high mortgage rates and home prices outpacing wage growth, it's easy to find yourself wondering how anybody is buying a house in today's economy. Homes have been unaffordable for many Americans in recent year, especially as prices skyrocketed after the pandemic and never really came back down to earth. It doesn't look like the outlook for next year will be any better, either. Mortgage rates are expected to remain high, exacerbating the lock-in effect and keeping existing home sales low, Goldman Sachs said in a recent report. To crack into the market, buyers are getting creative, whether through different financing structures, bargaining, or tapping into generational wealth. Rate buydowns With mortgage rates hovering near 7%, more homeowners are opting for a rate buydown to decrease their monthly costs. According to Goldman Sachs, the prevalence of rate buydowns has increased drastically post-pandemic, with roughly 40% new home sales involving a temporary rate buydown. Temporary rate buydowns reduce the buyer's interest rate for the first few years before the full rate kicks in. You can also buy mortgage points upfront to lower your rate for the full term of the loan. One point is typically 1% of the overall mortgage and lowers the interest rate by 0.25%. Sometimes, homebuilders or sellers will also offer rate buydowns to close a sale faster. "It is something that we're seeing more of right now," Daryl Fairweather, chief economist at Redfin, said of rate buydowns. It's a good strategy if you have more cash upfront and you're planning to stay in the house for the long term, Fairweather said. However, if you're planning on selling or if rates come down in the near term, a rate buydown might not be the best option. "If you end up selling a year or two from now, then you just bought those points, but you're not actually ever going to use them," Fairweather told Business Insider. Negotiations Affordability might be constrained, but buyers may still have room to negotiate. Sellers who purchased their homes during the pandemic are realizing that demand for homes has come down amid economic uncertainty. Sellers now outnumber buyers, and especially in hot pandemic markets like Florida and Texas, homes are sitting on the market for longer. Sellers are offering concessions such as cash, closing costs, repairs, and mortgage buydowns to entice buyers and close the deal. "Now that it's more of a buyer's market, buyers are taking their time. They realize that they can get a different home if the seller isn't being reasonable," Fairweather said. Additionally, with slowing rent growth, buyers can afford to be patient instead of rushing into the housing market. Goldman Sachs expects year-over-year shelter inflation to drop from 4.1% today to 2.6% by December 2026. "They can go to the rental market, where rents are pretty flat, and they can wait it out another year if they don't feel like the market has shifted enough in their favor," Fairweather said. Nepo money And finally, some homebuyers are getting help from family. A Redfin study from earlier this month found that nearly a quarter of Gen Z and millennial homebuyers who recently bought a home received assistance from their families through either a cash gift or an inheritance. Almost 21% of young homebuyers received a cash gift, and 11% used an inheritance for their down payment. As of 2024, the average down payment on a home was $63,000, or roughly 16.3% of the overall home price — a significant sum for younger homebuyers to front without help from family. Younger buyers might also be struggling with other financial obligations like student loans and high rents. Parental support isn't new, and Gen Z and millennials are fully tapping into it amid rising costs of living. Many younger people are opting to live with their parents, especially in expensive markets such as the Northeast and the West.
The Guardian
13-07-2025
- Business
- The Guardian
Why is the number of first-time US homebuyers at a generational low?
A cornerstone of the American dream is drifting out of reach. The estimated number of first-time homebuyers in the US dropped to a little more than 1.1 million in 2024, according to data from the National Association of Realtors shared with the Guardian: the lowest level since the NAR started tracking new buyers, in 1989. Economic instability is keeping the housing market at a standstill, with the number of new home owners at its lowest point in three decades. How did we get here? Home prices and mortgage rates remain high years after the peak pandemic housing boom. It's unclear when relief will come – and as Donald Trump's erratic policies on trade and the economy heightens uncertainty, economists fear the consequences may be felt for a generation. For young Americans, holding off on buying a home has become the new norm. Last year, the average age of a first-time homebuyer was 38 years old, a record high, according to the NAR. In the 1980s, the average was in the late 20s. Buying a home later in life typically has ripple effects, according to Daryl Fairweather, chief economist at Redfin. 'It probably means they're going to be retiring later, because when you buy a home, you're setting up for a 30-year-mortgage,' she said. 'People are finding that they're going to have to work longer basically to achieve these goals.' The highs and lows of the property market are closely tied to interest rates set by the US Federal Reserve. Interest rates currently sit between 4.25% to 4.5%, about 1% lower than they were this time last year. But mortgage rates are still above 6.5%, nearly double what they were five years ago. The housing market has felt the strain, with high mortgage rates suppressing the number of people able to buy their first homes. Typically, when demand drops, prices follow. But even when the number of buyers dropped, prices kept climbing. The median price of a single-family home hit record highs in 2024, and has only continued going up. In May, the median price was $427,800 – up from $357,100 in 2021, when home prices started to climb. At today's prices, a family would need to earn $126,700 a year to afford monthly payments on an average home purchased in 2024, up from $79,300 annually in 2021, according to a report from the Harvard Joint Center for Housing Studies. Economists say a historically low inventory of existing homes, coupled with sluggish new construction, is keeping prices high. And potential new homeowners are faced with a dilemma: renting is now significantly cheaper than buying. Analysis from John Burns Research and Consulting found that buying an entry-level home now costs twice as much as renting an apartment, for the first time since 2006. That's made the current housing market difficult for both buyers and sellers. And sellers are increasingly struggling to find buyers willing to take on higher mortgage rates. Given interest rates' impact on the housing market, Trump has repeatedly demanded that the Fed lower them. 'You have cost the USA a fortune and continue to do so,' Trump told the central bank's chair, Jerome Powell, in a handwritten note. But Powell and other Fed officials argue that Trump's tariffs have created ongoing economic uncertainty, especially around prices. Some consumers say they've already seen prices rise, and cutting rates risks fueling more inflation. 'It's a risk we feel. As the people who are supposed to keep stable prices, we need to manage that risk,' Powell told the US Senate last month. Few expect marked improvements in the housing market anytime soon. Economists say caution from the Fed will continue to affect the housing market. Buyers, including existing homeowners, are 'waiting for interest rates to drop or for prices to correct', said Fairweather of Redfin. 'What we're hearing is that the overall economic uncertainty makes people not want to commit to a mortgage right now.'
The Guardian
13-07-2025
- Business
- The Guardian
Why is the number of first-time US homebuyers at a generational low?
A cornerstone of the American dream is drifting out of reach. The estimated number of first-time homebuyers in the US dropped to a little more than 1.1 million in 2024, according to data from the National Association of Realtors shared with the Guardian: the lowest level since the NAR started tracking new buyers, in 1989. Economic instability is keeping the housing market at a standstill, with the number of new home owners at its lowest point in three decades. How did we get here? Home prices and mortgage rates remain high years after the peak pandemic housing boom. It's unclear when relief will come – and as Donald Trump's erratic policies on trade and the economy heightens uncertainty, economists fear the consequences may be felt for a generation. For young Americans, holding off on buying a home has become the new norm. Last year, the average age of a first-time homebuyer was 38 years old, a record high, according to the NAR. In the 1980s, the average was in the late 20s. Buying a home later in life typically has ripple effects, according to Daryl Fairweather, chief economist at Redfin. 'It probably means they're going to be retiring later, because when you buy a home, you're setting up for a 30-year-mortgage,' she said. 'People are finding that they're going to have to work longer basically to achieve these goals.' The highs and lows of the property market are closely tied to interest rates set by the US Federal Reserve. Interest rates currently sit between 4.25% to 4.5%, about 1% lower than they were this time last year. But mortgage rates are still above 6.5%, nearly double what they were five years ago. The housing market has felt the strain, with high mortgage rates suppressing the number of people able to buy their first homes. Typically, when demand drops, prices follow. But even when the number of buyers dropped, prices kept climbing. The median price of a single-family home hit record highs in 2024, and has only continued going up. In May, the median price was $427,800 – up from $357,100 in 2021, when home prices started to climb. At today's prices, a family would need to earn $126,700 a year to afford monthly payments on an average home purchased in 2024, up from $79,300 annually in 2021, according to a report from the Harvard Joint Center for Housing Studies. Economists say a historically low inventory of existing homes, coupled with sluggish new construction, is keeping prices high. And potential new homeowners are faced with a dilemma: renting is now significantly cheaper than buying. Analysis from John Burns Research and Consulting found that buying an entry-level home now costs twice as much as renting an apartment, for the first time since 2006. That's made the current housing market difficult for both buyers and sellers. And sellers are increasingly struggling to find buyers willing to take on higher mortgage rates. Given interest rates' impact on the housing market, Trump has repeatedly demanded that the Fed lower them. 'You have cost the USA a fortune and continue to do so,' Trump told the central bank's chair, Jerome Powell, in a handwritten note. But Powell and other Fed officials argue that Trump's tariffs have created ongoing economic uncertainty, especially around prices. Some consumers say they've already seen prices rise, and cutting rates risks fueling more inflation. 'It's a risk we feel. As the people who are supposed to keep stable prices, we need to manage that risk,' Powell told the US Senate last month. Few expect marked improvements in the housing market anytime soon. Economists say caution from the Fed will continue to affect the housing market. Buyers, including existing homeowners, are 'waiting for interest rates to drop or for prices to correct', said Fairweather of Redfin. 'What we're hearing is that the overall economic uncertainty makes people not want to commit to a mortgage right now.'
Daily Mail
02-07-2025
- Business
- Daily Mail
Housing market hits milestone not seen since 2009
The housing market has reached a milestone it has not seen for 15 years, and it could be good news for buyers. The number of newly built homes on the market is at the highest level it has been since 2009. Home builders are struggling to find buyers in the frozen housing market, as elevated interest rates disincentive existing owners moving, and keep mortgages out of reach for many first time buyers. Coupled with house prices remaining at their most unaffordable level in recent history, the result is an unusually high inventory of new-build homes available. Home builders are offering discounts and perks as they try to offload them, according to Marketwatch. The typical home buyer cannot afford to pay current prices and current interest rates on a mortgage. 'The big story in the housing sector remains the inventory situation,' Stephen Stanley, chief economist at Santander U.S wrote in a note to investors. Stanley says the inventory is now 'bloated' and has been since last spring when the market tends to pick up pace. Despite builders efforts to entice buyers, success has been limited, according to Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. 'Mortgage rates remain too high for sales to climb significantly higher, while the softening labor market likely will limit the flow of potential home buyers,' Allen wrote in a note. 'With housing payments at an all-time high, many buyers are feeling priced out,' Redfin chief economist Daryl Fairweather (pictured) told earlier this year. 'But sellers still need to move, which means they're increasingly offering concessions to get deals done — especially on condos and townhomes.' Major builder Lennar have said they will look to lower prices in order to move its existing inventory. And Lennar is not alone. Around 30 percent of builders cut home prices in January, the National Association of Home Builders (NAHB) reported — by an average of 5 percent. 61 percent of builders also offered sales incentives in January, the NAHB survey revealed. Incentives include mortgage-rate buydowns and smaller floor plans. Sales of newly built homes did grow in 2024 compared to 2023, according to federal government data, but inventory remains elevated. By contrast, 2024 was the worst year for sales in 30 years for the resale home market. Inventory in the resale home category is also rising, up 16.2 percent from a year ago, which gives buyers more options too. The South and West of the country are the most attractive regions for prospective new construction buyers, a new report from revealed. The regions have larger shares of new build homes available on the market, lower new construction premiums, and more opportunities for mortgage rate buydowns, the report found.
The Hill
21-06-2025
- Business
- The Hill
Baby Boomers: 1 in 3 say they'll never sell their home, according to survey
(NewsNation) — Over one-third of baby boomers who own their homes claim they will never sell them, according to a Redfin-commissioned survey. The survey also found that an additional 30% say they will at least hold on to their home for a decade, but are willing to sell. Those who are older (the Silent Generation) are even less likely to sell their homes, with 44.6% saying they never would. Younger homeowners, however, are on the opposite side of the spectrum. 21% of millennials/Gen Zers and 25% of Gen Xers said they would never sell their homes. According to Redfin, these results could reflect the fact that many baby boomers don't have the financial incentive that is typically needed to sell a home. Also, many older homeowners have lived in the same home for a while and prefer to stay where they are. Around 67% of the baby boomers in the study had lived in their homes for at least 16 years. Fifty-five percent of baby boomers said they like their homes and have no reason to move, which is the most common reason they stayed. Other common reasons included: Housing prices are up around 40% since before the COVID-19 pandemic, according to Redfin, with mortgage rates nearing 7%. That's up from around 4% before the pandemic. Currently, 31% of baby boomers said they wouldn't be able to own a home in a neighborhood similar to theirs in today's economy. This reasoning is also making it harder for younger Americans to find homes. 88% of homes owned by Baby Boomers are single-family homes, which also might not be large enough to fit an entire family. Only 5% are condos and 4% are townhomes. An analysis by Redfin in 2024 showed that baby boomers are much more likely to have larger homes, despite most millennials and Gen Z homeowners having minor children living at home, compared to only 4% of Baby Boomers. Redfin Chief Economist Daryl Fairweather said, 'With baby boomers opting to age in place rather than sell, it's challenging for younger buyers to find affordable options that fit their lifestyle. But it's worth noting that even though many older Americans say they're not planning to sell their homes, many are likely to eventually part ways as it becomes harder to live independently and/or keep up with home maintenance.' The study also showed that around 25% of millennials and Gen Zers won't be buying a home anytime soon because they can't afford one where they want to live. Other reasons include: At least supply is up, with nearly 500,000 more home sellers than buyers in the current market, according to Redfin. Redfin economists believe that home prices will decline by 1% by the end of 2025. This survey was commissioned by Redfin and conducted by Ipsos in May. Around 4,000 residents were included in the survey.
