What’s Trending In Real Estate – June

REA Newsletter 6.28.24

Real Estate Trends June 2024 - REA Accounting Newsletter

Having been in the design world for over many years, the evolution I’ve witnessed has been nothing short of phenomenal. But of all the advancements, the integration of 3D architectural visualisation into the process of creating smart homes stands out the most. It’s like watching the homes of the future take shape right before your eyes, thanks to 3D rendering services.

Smart homes were once the stuff of science fiction, but today, they’re becoming the standard for modern living. With systems that control lighting, security, and even your coffee maker, the future is here. And it’s not just about convenience; it’s about creating efficient, energy-saving homes that work smarter, not harder. 3D interior rendering has been a game-changer in visualizing these technologies within our homes.

 It’s one thing to list the features of a smart home, but it’s another to see them integrated into a 3D design for a home. Whether it’s showcasing how architectural animation can demonstrate automated systems in action or providing a virtual walkthrough visualization is key to understanding and refining smart home designs.

Veterans’ Benefits ‘More Important Than Ever’ in GI Bill’s 80th Year

Real Estate Trends June 2024 - REA Accounting Newsletter

Saturday marks the 80th anniversary of the GI Bill, which created the Department of Veterans Affairs’ Home Loan Guaranty Program(link is external) and has helped more than 28 million service members and their families become homeowners over the decades. The National Association of REALTORS® has long advocated for the expansion of the VA home loan program and most recently lobbied the department to drop its ban on buyer broker fees (which the VA has temporarily done).

The VA loan program has contributed $3.9 trillion to the U.S. economy, according to a new analysis by Veterans United Home Loans, a VA lender. About 11% of new mortgages are VA loans, and that number has been on the rise since the Great Recession, the study finds. Nearly 60% of VA purchase loans in fiscal year 2023 went to millennial and Generation Z buyers. 

“The survey findings and economic analysis underscore the profound impact of the VA loan program on veterans and service members, particularly younger generations,” says Chris Birk, vice president of mortgage insight at Veterans United Home Loans. Eight in 10 veterans were 34 years old or younger the first time they used their benefit, according to the survey. Ninety percent of veterans and service members say the biggest benefit of the VA home loan is that it makes purchasing a property more affordable.

The U.S. Needs 1.5M More Homes To Ease the Crisis Housing Shortage

Real Estate Trends June 2024 - REA Accounting Newsletter

The United States needs at least 1.5 million additional homes, and likely many more, to relieve the nation’s housing shortage, according to Freddie Mac.

In the first quarter of 2024, the homeowner vacancy rate dropped to 0.8% from 0.9% the prior quarter, the mortgage buyer said in a recent report on the housing market. That’s well below the 1.6% average vacancy rate recorded from 1994 to 2003, the period the report uses as a basis for comparison, and near the all-time low hit earlier last year.

Meanwhile, the rental vacancy rate remained flat for the third straight quarter at 6.6%, down from 8.2% during the historical comparison period. Rental vacancies touched four-decade lows in 2021 and 2022 and crept up slightly last year.

“To bring the vacancy rate, both rental and homeowner, back in line with historical averages, the U.S. would need to add an additional 1.5 million vacant for-sale and for-rent homes,” the report says. “Without such units, the pressure on housing markets will persist.”

Despite higher mortgage rates, the housing market has remained incredibly tight due to a shortage of homes for sale. Earlier this week, the benchmark index tracking U.S. home prices hit a new all-time high, after surging 47% in the past four years.

Real Estate Trends June 2024 - REA Accounting Newsletter

Fitch Ratings-New York/London-25 June 2024: Modest home price growth and mild increases in arrears will continue globally through 2024, broadly tracking Fitch Rating’s annual forecasts for the 15 countries covered in our 2024 Global Housing and Mortgage Outlook. Housing supply that is insufficient to meet demand continues to be the defining feature of housing markets. As a result, we have increased our 2024 home price growth forecasts for five countries from our December 2023 forecasts.

We expect home prices in the U.S. to grow by 3%-5% in 2024, with a 1.5% increase already recorded in the first quarter. We also anticipate mortgage rates will hold steady, ending the year between 6.5% and 7.5%. Mortgage arrears remain at all-time lows, with our arrears forecast unchanged.

We have increased our home price growth forecast for Spain to 3%-5% in both 2024 and 2025, although there is a divergence between growth in urban and tourist centers and stagnation in less populated areas. We have also revised Spain’s mortgage rate forecast down slightly to 3.75%-4.25% in 2024 and 3.5%-4.0% in 2025 due to the ECB’s recent 25bps rate cut and expected rate trajectory. Our 2025 projection for arrears in Spain has increased modestly to 3.0%-3.5%, reflecting the strain on a considerable segment of vulnerable borrowers from increased monthly payments and depleted savings, despite a strong labor market.

The home price growth forecast for the Netherlands is now 8%-10% for 2024, following growth of nearly 4% over the first four months of 2024, spurred by wage growth outpacing inflation, stabilized mortgage rates, and a persistent housing supply shortage. We have slightly raised the 2025 forecast to 5%-7%. Mortgage rate projections have risen to 3.75%-4.25% for 2024 and 3.5%-4.0% for 2025 because rate reductions for longer term fixed-rate mortgages have been slower than anticipated. We have not changed our arrears forecasts.

Real Estate Trends June 2024 - REA Accounting Newsletter

Mortgage rates continued to fall this week, with the average rate for a 30-year fixed home loan sinking from 6.95% last week to 6.87% for the week ending June 20, according to Freddie Mac.

“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “These lower mortgage rates coupled with the gradually improving housing supply bodes well for the housing market.”

Mortgage rates have hovered around the 7% mark, fluctuating slightly above and below this benchmark for nearly two months, creating a market largely stuck in neutral.

As a result, the housing market remained remarkably unchanged as spring turned to summer this week, with key metrics like home price and housing stock levels remaining the same as last week.

Does this mean the market is stabilizing or on the brink of change? It all comes down to where mortgage rates eventually land in the coming months.

“A recent survey revealed that a sizable 40% of potential buyers would find a home purchase feasible if mortgage rates were to drop below 6%,” says Realtor.com® data scientist Sabrina Speianu in her latest analysis.

Real Estate Trends June 2024 - REA Accounting Newsletter

Homebuyers, homeowners, and home sellers have likely heard that real estate tends to appreciate over time. The next logical question they often wonder is this: How much will their property be worth in the future?

Let’s be frank: Predicting the future value of a home is a challenging task due to the multitude of factors involved, including economic conditions, local market dynamics, and potential downside risks. So instead of trying to make an exact prediction about what home prices might look like in 12 months or 24 months, let’s examine the historical returns and see if they could give us any clues about the long-term potential.

To do our analysis, Realtor.com® pulled historical data from Freddie Mac to calculate the average home price returns since 1975.

Since 1975, the average five-year return on U.S. home prices has been +26%.

Given Realtor.com data shows that the median list price in May comes in at $442,500, in theory, this same listing could appreciate to about $557,550 in five years.

But this will vary a lot by area: The highest average five-year returns have been observed in Massachusetts (+36%), Rhode Island (+34%), and California (+34%).

The lowest average five-year returns have been seen in Oklahoma (+14%), West Virginia (+15%), and Louisiana (+15%).