Let's dive right into some of the more timely trends we're seeing. Here's what's happening in real estate in July 2021.
1. Housing affordability is dwindling
We all know that home prices have been on a tear in recent months, but until recently, low mortgage rates and strong incomes had done a lot to stave off any real dips in affordability.
Unfortunately, those days have come to an end. According to ATTOM Data Solutions, housing affordability is now below historical averages in 61% of U.S. counties. That’s up from 48% last quarter and the highest share in two years.
A report from title insurer First American found similar declines in housing affordability. According to the company, affordability dropped in 45 of the 50 top markets, with Kansas City, Phoenix, and Tampa seeing the biggest declines.
2. Renter and homeowner protections are getting extended
The pandemic has spurred a slew of renter and property owner protections, including an eviction ban, a foreclosure ban, and widespread mortgage forbearance options. Though many of those were set to expire in June, they once again got extended, giving hard-up property owners, tenants, and mortgage borrowers additional time to get back on their feet.
Landlords got the short end of the stick, of course, and the extension of the CDC’s eviction ban will continue to put a strain on those with nonpaying tenants in tow. Fortunately, the White House has said these extensions were the last of their kind. That means evictions may soon be back on the table -- at least in areas without local bans in place.
Additionally, when the foreclosure moratorium lifts at the end of the month, it could mean additional low-cost properties to invest in -- and maybe even some downward pressure on home prices.
3. Flipping rates -- and profits -- are slipping
New data released in June shows a big dip in both home flipping rates and profits. According to ATTOM’s 2021 U.S. Home Flipping Report, flips only accounted for 2.7% of all transactions in the first quarter of the year -- the lowest share in over two decades.
What’s worse? Flipping profits dropped, too. The typical gross profit for a flipper was $63,500 last quarter -- or a 37.8% ROI on average. That’s down from 41.8% the previous quarter and the lowest ROI since 2011.
“It’s too early to say for sure whether home flippers indeed have gone into an extended holding pattern,” said Todd Teta, chief product officer at ATTOM. “But the first quarter of 2021 certainly marked a notable downturn for the flipping industry, with the big drop in activity suggesting that investors may be worried that prices have simply gone up too high.”
4. Listings are up
The market has been plagued with a supply problem for some time now. Lately, though, there have been faint signs of improvement.
According to Realtor.com, new listings were up 4% year over year in the last week of June. And while total inventory is down 42% over the year, that’s an improvement from the 54% dip seen back in April.
“We have seen more new listings this year compared with 2020 in 11 of the last 13 weeks,” said George Ratiu, senior economist at Realtor.com. “Home inventory remains tight, but there is a clear improvement.”
5. Foreclosures are starting to pick back up
Despite the foreclosure moratoriums that are still ongoing, foreclosures appear to be on the rise. According to ATTOM and RealtyTrac, foreclosure filings are up 23% from a year ago. Actual foreclosure starts are up 36%.
All in all, one in every 12,700 housing units had a foreclosure filing last month. Foreclosure rates were highest in Nevada, Delaware, Illinois, Florida, and New Jersey.
According to Rick Sharga, executive vice president at RealtyTrac, investors can feel encouraged by the latest data, but they shouldn’t celebrate just yet.
“While the increase in foreclosure activity is significant, it’s important to keep these numbers in perspective,” Sharga said. “Last year’s numbers were extraordinarily low due to the implementation of the foreclosure moratorium and the CARES Act mortgage forbearance program, so the year-over-year numbers look a lot more dramatic than they are.”
The bottom line
Real estate trends are always in flux. Want to stay on top of these latest trends and happenings? Check back here every month for updates.