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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 76 March 2024 J O U R N A L tinue to enjoy record-high home equity. At $344,159, the average home value in the United States has increased by about $100,000 since 2020. Only three of the 50 largest U.S. metro areas saw a decline in home values over the course of the year, and the country's annual appreciation rate of 3.6% is generally healthy. According to the most current data available, almost 25% of homes sold for more than the asking price in December. That's less than the rate-driven early pandemic real estate frenzy, but it's still somewhat higher than December 2022 and far higher than the pre-pandemic pe- riod, when less than 20% of properties sold for more than list price. San Diego, where new listings are up 28% yearly, Miami (22%), and Riverside (20%) are metro areas where sellers are coming up stronger than they did a year ago. What can buyers and sellers expect in the coming months? All the above suggests that the current home buying season is rather compet- itive and that desirable properties are going quickly. Many millennials and baby boomers are searching for homes due to demographic trends and a robust economy, even though affordability is still difficult to come by. Buyer and Sellers to Face Competition in 2024 Attractive listings are moving quickly— listings that sold in January did so in 29 days. That's slower than during the rush for real estate while mortgage rates were low, but 19 days faster than pre-pandemic norms. Listings that are overpriced or poorly prepared, however, continue to linger on the market. In an effort to meet buyers where they are, sellers are lowering their prices. At 20.9% of postings, price reduc- tions are comparatively common; while they are slightly less frequent than in the previous year, they are still more frequent than in any of the five years before that. In December, about 26.4% of proper- ties sold for more than they were listed for. It is an increase of 2.5 percentage points over the previous year and 8 percentage points from the pre-pandemic averages. San Jose (33.8%), San Francisco (14.3%), and Los Angeles (14.3%) had the largest yearly growth rates. Newly pending listings increased by 25.5% in January from the prior month and decreased by 3.8% from last year. Renting Remains an Option for Buyers and Sellers According to the report, the typical U.S. rent sits at $1,958. The annual increase in rent has remained steady at 3.4%, essen- tially unchanged since August. The Great Lakes, Midwest, and Northeast metro areas have the largest annual rent growth. The top three are the same as those observed in December: Providence (7.7%), Cincinnati (7.1%), and Hartford (7.0%). "Buyers should prep their credit scores and sellers should prep their properties now—attractive listings are going pending in less than a month, and time on market will shrink in the weeks ahead," Olsen said. IS THE RACIAL MORTGAGE READINESS GAP SHRINKING? A ccording to recent Zillow research, the percentage of Black and white renting families that could easily afford a mortgage payment decreased dramatically during the pan- demic. Despite these improvements, there is still a noticeable disparity in homeown- ership and a disproportionate number of mortgage rejections, indicating that Black families face additional obstacles outside of income-related ones that prevent them from becoming homeowners. According to the American Commu- nity Survey, 38.6% of the 138 million Amer- ican families did not own a home in 2022. Out of them, almost 6.3 million families were deemed "income mortgage-ready," which indicates their earnings would enable them to make a standard mortgage payment in their area without experienc- ing financial hardship. Key Findings: » In 2022, nearly one in ten Black fam- ilies that did not own were income mortgage-ready—meaning they could afford the monthly cost of a new mortgage for the typical home in their metro area. » Rising mortgage rates caused the share of mortgage-ready Black families to decrease to 7.8% from 26.7% in 2012. However, the difference between the share of white families and Black families that can comfortably afford to take on a mortgage decreased from the peak of 7.9 percentage points in 2012 to 4.7 percentage points in 2022. » While higher home values and higher mortgage rates lowered the share of mortgage-ready families, the median family income of Black renters in- creased by 37.7% compared to 35.1% for white families from 2012 to 2022. Approximately 7.8% of Black non-homeowning families were con- sidered income-ready for a mortgage, whereas 12.5% of white families were, representing a 4.7 percentage point dif- ference. While it remains substantial, the difference has narrowed since 2012, when it stood at 7.9 percentage points. "Despite the significant decline in mortgage affordability in the past two years, millions of families who do not own their home have the means to afford the largest share of a homeowner's cost—the mortgage," said Orphe Divounguy, Zillow Senior Economist. "While some families may choose to rent, many are simply constrained. It's crucial to recognize the existence of additional barriers beyond monthly cost, including access to funds for a down payment and closing costs—as well as other barriers that significantly contribute to mortgage denials, like insufficient credit scores and lack of access to credit. These barriers especially impact people of color." Still, when mortgage rates doubled, the number of renting families across all races who could afford a mortgage fell from 12.9 million in 2021 to 6.3 million in 2022. All U.S. renters were impacted by rising mortgage rates and prices. However, since 2012, Black renters' median family income has increased faster than that of white renters. During the years 2012 to 2022, the racial mortgage preparation