Housing Market Roundup: Mar. 12, 2021

Lots of housing market reports piling up in the MBA NewsLink inbox. Let’s get going:

CFPB Rescinds ‘Abusiveness Policy’ Statement

The Consumer Financial Protection Bureau rescinded its January 24, 2020 policy statement, “Statement of Policy Regarding Prohibition on Abusive Acts or Practices.” Going forward, the CFPB said it intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress.

In a press release, the Bureau said it made these changes to “better protect consumers and the marketplace from abusive acts or practices, and to enforce the law as Congress wrote it.”

Congress defined abusive acts or practices in section 1031(d) of the Dodd-Frank Act. Paraphrasing Congress, that standard prohibits companies from:

• Materially interfering with someone’s ability to understand a product or service;
• Taking unreasonable advantage of someone’s lack of understanding;
• Taking unreasonable advantage of someone who cannot protect themselves; and
• Taking unreasonable advantage of someone who reasonably relies on a company to act in their interests.

The Bureau said the 2020 Policy Statement, issued during the Trump Administration, was “inconsistent with the Bureau’s duty to enforce Congress’s standard and rescinding it will better serve the CFPB’s objective to protect consumers from abusive practices.”

For example, the 2020 Policy Statement stated that the CFPB would decline to seek civil money penalties and disgorgement for certain abusive acts or practices. The CFPB deters abusive practices and compensates certain harmed consumers using penalties, so the Policy Statement undermined deterrence and was contrary to the CFPB’s mission of protecting consumers.

Going forward, the CFPB intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion. But a policy of declining to enforce the full scope of Congress’s definition of an abusive practice harms both the consumers who were taken advantage of and the honest companies that have to compete against those that violate the law.

The Rescission of the Policy Statement can be found here.

ClosingCorp: Despite Jumps in Prices, Volume, Average Closing Costs Up only 4%

ClosingCorp, San Diego, released its most recent closing cost data, which showed that in 2020 national average closing costs for a single-family property rose to $6,087 including taxes, and $3,470 excluding taxes. These were 5.9 percent and 3.9 percent year-over-year increases, respectively.

ClosingCorp cost calculations include lender’s title policy, owner’s title policy, appraisal, settlement, recording fees, land surveys and transfer tax.

“Thanks to record low interest rates and a rapid shift to remote work, 2020 was a strong purchase market eclipsing the 2003 high,” said ClosingCorp CEO Bob Jennings. “Purchase originations topped $1.4 trillion, and the average home price increased by nearly 10 percent.”

The report said the U.S. mortgage industry handled this significant increase in volume, and an even larger spike in refinances, seamlessly, and did it working remotely for three quarters of the year.  The average U.S. home price increased by $30,000 last year, but the year-over-year difference in the average purchase closing costs was only $339 including taxes and $131 excluding taxes. Considering the high dollar amount and complexity of the average purchase transaction, our industry continues to demonstrate an impressive level of cost control.”

Jennings attributed much of the cost control to the increased use of technology by both lenders and settlement services providers which enabled the industry to scale up capacity while holding the line on closing costs.

Fannie Mae: Lenders’ Profit Outlook Dips as Mortgage Rates Rise, Competition Heats Up

Fannie Mae, Washington, D.C., said the share of mortgage lenders expecting profit margins to decline in the months ahead increased for the second consecutive quarter, with an even greater share of lenders now expecting profit margins to decrease in the months ahead.

The company’s Q1 2021 Mortgage Lender Sentiment Survey reported 52% of lenders believe profit margins will decrease, compared to 48% in the prior quarter, while 33% believe profits will remain the same and 15% believe profits will increase.

“Despite continued strong expectations for purchase mortgage demand moving forward, many lenders are signaling caution about their profitability and market competitiveness,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “This quarter, the largest net percentage of lenders in the survey history are expecting a decrease in their profit margin outlook. Those who expected a lower profit margin cited competition from other lenders as the primary reason, reaching a survey high last seen in Q1 and Q2 of 2018, while a market shift from refinance to purchase was cited as the next biggest reason for the first time since Q4 2019.”

Redfin: Jacksonville, Austin, Charlotte Lead 13% Surge In Total U.S. Housing Market Value During Pandemic

Redfin, Seattle, said total value of homes in the U.S. surged by 13.4% ($4 trillion) during the coronavirus pandemic, to $33.4 trillion in February from $29.4 trillion a year ago.

Redfin said the increase was driven by Jacksonville, Fla.; Austin, Texas; Charlotte, N.C.; Phoenix; and Sacramento, Calif.—relatively affordable, sunny destinations that have attracted an influx of wealthy homebuyers from dense, coastal cities.

One reason prices have jumped is that so many people have been able to relocate thanks to remote work. Affluent Americans and major corporations have left San Francisco and New York for less expensive locales such Austin and Charlotte, and they took their wallets with them. As a result, home values in these places have seen an especially sharp increase. This has benefited families that already own homes but pushed homeownership further out of reach for many Americans, exacerbating wealth inequality in the U.S.

Three of the top 10 metros—Austin, Phoenix and Sacramento—have consistently made Redfin’s ranking of the most popular migration destinations during the pandemic. Austin had a bigger net inflow of residents than any other major metro in January, meaning more people looked to move in than leave. Nearly 45% of Redfin.com home searches in Austin came from users in other metro areas in January, up from 32.6% a year earlier.

Redfin: Homebuyer Interest in Vacation Towns and Suburbs Soars

Another Redfin report said housing markets in vacation destinations and relatively affordable suburbs of big cities have heated up more than any other area over the last year, a period that starts with the onset of the coronavirus pandemic in the U.S.

Redfin said places such as Lake Tahoe, Cape Cod, and suburbs of Chicago and New York City are gaining popularity as homebuyers take advantage of remote-work policies to prioritize affordability and personal preferences like proximity to nature and recreation over living near the office.

iBuyer Market Continues Slow Recovery

Another Redfin report found the nation’s top iBuying companies purchased just 3,505 homes in the fourth quarter, down 48% from a year earlier. That represents 0.3% of homes that sold across the 418 U.S. metropolitan areas tracked by Redfin in the fourth quarter, down from 0.8% a year earlier but up slightly from 0.2% in the third quarter of 2020. 

The term “iBuyer” (short for instant buyer) is used to describe real estate companies that purchase houses from homeowners in quick cash transactions by using algorithms to evaluate a property’s worth based on comparable market data. Real estate firms including Redfin, Zillow and Opendoor put iBuying on hold at the onset of the coronavirus pandemic amid substantial economic uncertainty. These companies resumed their iBuying businesses in May and June as housing demand began to rebound thanks to record-low mortgage rates and a wave of relocations made possible by remote work.

Still, business remains slower than usual, in part because the housing market is so hot. With homebuyer demand through the roof, many sellers figure they can offload their homes without having to share the profits. Plus, an intense shortage of homes for sale means there aren’t as many properties for iBuyers to purchase in the first place. 

Zillow: Luxury Kitchen Amenities are New Pandemic ‘Must-Haves’

Zillow, Seattle, said after a year of eating at home — and finding escapism in the form of freshly baked bread or desserts — home buyers want the professional features and equipment to take their cooking to the next level.

New Zillow research finds buyers are willing to pay a premium for luxury kitchen amenities. From professional appliances to quartz countertops, six out of the top 10 features mentioned in listings that sold for more than expected in 2020 are kitchen-related. Steam ovens were the hottest feature of the year, associated with a 4.9% premium — more than any other home feature and style Zillow analyzed. The sale premium for steam ovens increased one percentage point from Zillow’s analysis the year before, and jumped up 24 spots on the list.

“The life changes triggered by the pandemic have caused everyone to reconsider what’s most important about their homes, and that’s reflected in the shifting importance of home features measured by sale price premiums,” said Zillow Home Trends Expert Amanda Pendleton. “It’s clear that buyers were especially drawn to useful and beautiful kitchen features in 2020, even more than in a typical home shopping season.” 

Other kitchen features associated with a price premium include “new appliances” (3.2% higher sale price), and “smart appliances” (3%). Listings mentioning “open shelving,” a trendy design feature made popular by home improvement TV shows, sold about six days faster than expected.  Driven by the pandemic trend of dining in and entertaining at home, listings mentioning “pizza ovens” sell for 3.4% more than expected — jumping 41 spots from last year to become the feature with the fourth highest price premium.

Homes Sell Closer Than Ever to List Price as Average Sale-to-List Ratio Approaches 100%

Redfin Seattle, said the median home-sale price increased 16% year over year to $323,600, a record high. This is the largest increase on record in this data set, which goes back through 2016.

For the four-week period ending February 28, asking prices of newly listed homes hit a record-high $347,475, up 10% from the same time a year ago. Pending home sales were up 18% year over year. New listings of homes for sale were down 17% from a year earlier. Active listings (the number of homes listed for sale at any point during the period) fell 40% from 2020 to a record low.

Additionally, the report said 55% of homes that went under contract had an accepted offer within the first two weeks on the market, well above the 44% rate during the same period a year ago. During the week ending February 21, 57% of homes sold in two weeks or less. Forty-three percent of homes that went under contract had an accepted offer within one week of hitting the market, up from 30% during the same period a year earlier. This is also an all-time high for this measure. During the week ending February 21, 44% sold in one week or less.

“Over the last few weeks winter storms have disrupted the housing market, and mortgage rates have risen sharply,” said Redfin Chief Economist Daryl Fairweather. “Although pending sales and new listings have taken a small hit in the last couple of weeks, home price gains are showing no signs of slowing down. However, it’s just too early to tell what the impact of these changes will be to the spring housing market. The effects of the storms should be temporary, but higher mortgage rates could make some buyers less willing to bid up home prices.”