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When it comes to rising interest rates, homebuyers are mostly unperturbed, according to a new survey released by Redfin. In a poll of 1,300 current and recent homebuyers, only five percent of respondents said they’d stop looking for a home purchase if rates went above the five percent mark, while 24 percent said such an increase would have no impact on their home search. These results were consistent with previous surveys commissioned by Redfin. For buyers who were concerned about rates going above five percent, 32 percent of them said they’d slow their search and wait to see if rates dropped, while 21 percent said they would either buy a smaller property or look in another neighborhood. Nineteen percent of respondents said they would put greater urgency into their search in case rates kept rising. “Homebuyers are well aware that higher rates bring higher monthly payments, but rates remain very low, historically, and buyers will make compromises,” said Taylor Marr, Senior Economist at Redfin. “Most of the pressure buyers are feeling is from competition for a very limited number of homes for sale. The fact that such a small share of buyers will scrap their plans to buy a home if rates surpass five percent reflects their determination to be a part of the housing market.” Source: National Mortgage Professional

New-home construction appeared to finally break out in May, but economists say the production of houses would need to rise a lot more to ease widespread housing shortages. “That is a number of years off,” said Robert Dietz, chief economist for the National Association of Home Builders. In May, single-family starts clocked in at an annual pace of 936,000 units, up 18 percent compared to May 2017. Total annualized housing starts in May ran at 1.35 million, an annual gain of 20 percent. That’s still well shy of what is needed to keep up with the population growth and replace old and damaged properties, Dietz said. The nation’s builders would need to produce about 1.2 million single-family homes each year, he said, about 250,000 homes more per year than are being started right now. Dietz said it is unlikely that the pace of home building will catch up in time to substantially ease the housing shortage and cool off the rapid rise in home prices while the economy is still strong. Builders, he said, likely won’t produce enough homes next year to meet the demand. “Typically, in a market where home prices continue to rise because of that lack of resale inventory, builders would be incentivized to build more,” Dietz said. “We are still looking for the same situation we have had for three or four years, with a constrained construction market. Right now, the top two constraints are lumber prices and the ongoing labor shortage. I think we are still a number of years away from a 1.2 million single-family starts rate.” Each year that homebuilding doesn’t keep pace, it adds to a growing deficit of newly built homes. Homebuilding levels have run far below the historic average for a decade. From 1983 through 2007, there were just two years (1990-1991) where single-family home starts fell short of hitting the one million unit mark, according to the U.S. Census Bureau. During the Great Recession and its immediate aftermath, annual starts averaged under 500,000 units, and have yet to reach the one million mark during the recovery. Meanwhile, the demand has been growing as millions of millennials are now of age to buy homes. “We roughly estimate that we are about five million units underbuilt at the moment,” said First American Corp. Chief Economist Mark Fleming said. Source: The Scotsman Guide

More real estate transactions are reportedly tying in a “bump clause” to give sellers some assurance that they are receiving the best offer. A bump clause allows sellers to enter into a contract with a buyer but continue to market the property. If the seller then receives a better offer, they can bump the original buyer to get them to waive their contingency or offer more. The bump clauses are usually used when a contingency is involved in the original offers. Buyers may offer it to sellers to get them to accept their offer, which may have a contingency like selling a house first before proceeding with the purchase of the new one. If sellers do get another offer they wish to take, they have to notify the original buyer first. The buyer then has a few days to tell the seller they’ve decided to waive their contingency, or the original contract is terminated. If the contract is terminated, the original buyer gets their earnest money returned and sellers are then able to enter into a contract with the new buyer. Sellers are able to continue marketing the property only until the buyers satisfy or waive the contingency. Once they do that, the seller must stop marketing the property to other buyers. Real estate pros say the clause is mostly used in housing markets that once saw rapid home sales, but where sellers haven’t adjusted their expectations yet. Source: The Wall Street Journal