RE/MAX president and CEO Nick Bailey discusses how rising mortgage rates are adding to housing affordability deterioration on ‘The Claman Countdown.’
As U.S. home prices show signs of cooling and the Fed continues its aggressive rate hike campaign, one of America’s largest real estate groups is signaling market affordability will continue to put pressure on homebuyers this year.
“Affordability has certainly been a hot topic,” RE/MAX President and CEO Nick Bailey said in an exclusive interview on “The Claman Countdown” Tuesday. “If people are going to have a chance at better affordability, we need more product out there, and we’re not going to see that any time soon with new construction.”
Even though U.S. home prices fell for the seventh month in a row by 0.6% from December to January, mortgage rates have dampened consumer demand. The Federal Reserve has remained focused on its inflation reduction goals, lifting the benchmark federal funds rate nine consecutive times.
Interest and mortgage rates are likely to continue “bouncing up and down” as the Fed tries to tame decades-high inflation, Bailey noted.
“We always have to keep in mind that mortgage rates are based on the 10-year Treasury, and that can fluctuate at a different rate than the short term. So what it means to buyers is, rates are going to bounce around, we believe. They have been over the last couple of quarters and we believe they will continue as the year progresses,” the CEO explained.
RE/MAX President and CEO Nick Bailey said housing affordability will be a market issue that continues throughout the year on “The Claman Countdown” Tuesday. (Getty Images)
Bailey detailed other affordability solutions for homebuyers, such as considering a 15-year fixed mortgage or lower down payment and loan opportunities.
“The average homeowner in the U.S. lives in their home eight years and the median is 12.3,” he pointed out. “So in many cases, people are choosing this long-term, three-decade mortgage, but they may not need it. They can have an option at a lower rate.”
National Association of Home Builders CEO Jerry Howard surveys the state of the housing market as the U.S. economy continues to grapple with inflation on ‘Varney & Co.’
“Ninety percent of homeowners out there have an interest rate less than 5%. And of that, 50% of them are under 3.5% percent,” he continued to note. “And so until a life event like getting married, having another child, really has a forcing function on a different property, it’s going to be first-time homebuyers that stay at the forefront of these lower interest rate, more affordable-type products.”
While market factors play an important role in housing affordability, Bailey again put the onus on new home construction. According to the Census Bureau, housing starts in February 2023 were down 18.4% year-over-year.
National Association of Home Builders CEO Jerry Howard affirmed this trend, telling FOX Business’ Neil Cavuto on Thursday that construction companies aren’t seeing the “uptick in demand” that the industry was expecting this spring.
The year over year housing prices in the U.S. decreased in February for the first time in more than a decade. Realtors say buyers should strike quickly while prices are lower.
“What we’re really seeing right now, I think, is a very cautious housing market because no one knows what’s going on in the banking sector,” Howard said. “And until that gets clarified, I think you’re going to see builders being a little bit leery about going forward.”
“New construction can’t come out of the ground fast enough. We have less than a million homes on the market, and so it really comes down to supply,” the RE/MAX CEO said. “And because of the move up, buyers being comfortable with their rates, inventory is going to continue to be tight and affordability is going to continue to be an issue this year.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
