Lew Sichelman
Square footage always increases in slow markets when the only people buying new houses are middle- and upper-income earners. But when the market speeds up, builders try to go smaller in an attempt to capture a larger share of sales.
This year, though, the story’s a little different. With the new home market booming, the trend is toward larger houses, not smaller, largely because people are using their homes for more purposes – work, for example – and need more space.
Census Bureau data shows that in the third quarter, the average size of a new single-family house rose to 2,541 square feet. That means the average size of a new house is now 6.2 percent larger than it was when the Great Recession ended. And going forward, economist Robert Dietz at the National Association of Home Builders expects the current trend to continue.
For what it’s worth, the size of a typical house rose from 2009 to 2015 as entry-level new construction was constrained. But it declined between 2016 and 2020 as more starter homes were developed.
Suit Against ‘Love Letter’ Ban
The controversy over so-called “love letters,” in which would-be buyers play on sellers’ heartstrings in an effort to have their offers accepted, has reached a new level in Oregon, the first state in the country to ban such missives.
Some agents swear by letters that tell sellers how special their houses are, how the buyer will take loving care of the place and so on. But other agents avoid them like the plague. Some listing agents will go so far as to remove them from offers so the seller never gets to see them.
Now, Oregon forbids love letters because they could break fair housing laws, in that they sometimes contain personal information that can be used to discriminate against buyers based on their race, sex, religion or family situation. But Total Real Estate Group in Bend, with the backing of the Pacific Legal Foundation, has filed suit arguing that the prohibition is a violation of buyers’ and agents’ First Amendment rights.
Stay tuned.
Closing Time Woes
The ongoing sales crush has everybody hopping, including title companies. A report from PropLogix says unexpected closing delays are their biggest headache.
In a survey of 400 title and settlement professionals – the folks who search a home’s pedigree to make sure there are no undisclosed heirs hiding in the woodwork, or forged signatures on old documents – more than half told the company that closing on time is a constant struggle these days.
One reason: They are handling more settlements than ever. In fact, 18 percent said they were managing 21 to 30 closings a month. In last year’s survey, just 10 percent were covering that many.
Investors Grow Share of Market
Buyers these days have a lot of competition, and not just with each other. According to a new Redfin report, 18 percent of all houses sold in the third quarter were gobbled up by investors.
That’s up from 16 percent in the second quarter and 11 percent for the same period a year ago. Overall, investors snatched 90,215 houses out of the hands of people who wanted to actually reside in the properties.
Redfin defines an investor as any institution or business that purchases residential real estate. Sellers tend to favor them because they are usually flush with cash, which means sellers don’t have to worry about the buyers’ financing falling through.
More Changes to Conforming Limits?
All those homebuyers who paid exorbitant prices last year actually did future buyers a small favor, at least for the next 12 months.
Whatever happens to mortgage rates going forward – up, down or flat – they’re likely to be a tad cheaper for many buyers in 2022, thanks to the 18.5 percent increase in the so-called conforming loan limit.
The limit is the cap on the size of loans that can be purchased by Fannie Mae or Freddie Mac, the two secondary market enterprises set up by Congress that keep primary lenders flush with cash to make more loans. When Fannie and Freddie buy loans from lenders, they turn them into securities.
Investors who buy those bonds are willing to take a slight haircut because they believe their money is safe with Uncle Sam standing behind their investments. And as a result, rates on loans sold to the government-sponsored enterprises are usually 0.25 percent to 0.50 percent less.
In 2022, the ceiling will be $647,200 for one-unit properties, an increase of $98,950 from this year’s limit. In high-cost markets, the new limit will be $970,800.
The conforming loan limit is set by law, but some are saying the formula must be changed. And one entity, Redwood Trust, a major player in the non-conforming market, said the GSE regulator has the authority to reduce the pool of mortgages eligible for acquisition by Fannie and Freddie without any help from Congress.
“Despite popular thinking, the Federal Housing Finance Agency is not required to implement the maximum conforming limits,” the company said, adding that the GSEs could more effectively support their affordable housing mission with a reduced focus on high-balance loans.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com
