Since 2020, K2 has hosted regular virtual round tables to keep our audience updated with the latest global changes across the US market, and any impacts on the global mobility space.
As we hit the 1500-minute milestone on our round tables, we wanted to give our readers an exclusive insight into one of these interactive sessions.
In our most recent round table, K2’s Vice President of Business Development for the Americas, Brad Shepard, was joined by K2 Manager of Real Estate Services for the Americas, Kathleen Donovan, and guest speaker, Joe Dudek from Rocket Mortgage, to discuss housing market updates in the United States and the effect of current trends on global mobility.
Brad comments:
“We had a great turnout for the event, and as ever, our audience were keen to interact and share ideas – and have the opportunity to ask our experts some of their burning questions.
Hitting the 1500 minute milestone gives me the opportunity to reflect on how far we have come with our round tables and the incredible network of US-based Global Mobility professionals that we have built. Our round tables are open discussions and any Global Mobility or HR professional is welcome to join and connect with peers.
We’ll be continuing to host these sessions regularly throughout the rest of the year, and beyond, so keep an eye out for the next round table agenda to be posted on our events page in due course.”
US Housing: summary of key points
Current and future state of housing
- The housing market is encouraging as we are seeing an uplift in new listings. Home sale inventory is improving in most markets.
- There is a 17.5% average appreciation across the price of housing, which is great news for homeowners.
- Covid has led to a rise in remote working, which has had a knock-on impact on the locations facing higher housing demand. For example, the sunbelt states in the United States now face unprecedented demand, as employees no longer need to be located around major cities.
Discussion point: are we currently in a housing bubble?
- The early 2000’s housing bubble was driven by a rapidly increasing inventory and subprime lending practices. The mortgage landscape in 2022 is very different to the landscape in the early 2000s, meaning a full-scale burst is unlikely, but a small adjustment is probable. On average, we should see home values increasing at around 8% moving forwards.
Changes to home purchase
- The norm has always been for transferees to list their home for sale prior to beginning a home search. However, due to the competitive home purchase market, companies are now recommending that transferees begin the home search process first.
- Competition for housing has eased in recent months. In 2021, transferees could be competing with between 40 – 50 buyers for a single property, whereas we’re now seeing an average of around 4 – 5 buyers putting in offers per property.
- Due to demand, buyers had previously been removing common contingencies for home purchase, such as appraisal contingencies and inspections. As demand levels have steadied, common practices including these have been re-instated.
- There is still a delay in appraisals being completed in the United States, as it takes an average of 8+ months for appraisal data to catch up to the market.
Housing market challenges
- 60% of homes are still selling over list price, at an average of between $5 – $20K over asking.
- However, this has rapidly decreased from the over-asking price offers that we saw in the previous year (2021). Rising mortgage interest rates mean that buyers cannot afford to offer the same over-payment prices as they were previously.
- Due to the competitive market, buyers are becoming creative with offers, such as allowing rent-back agreements, where sellers are allowed to stay in the house until a new property has been secured.
- As homes are not always acquiring at the expected rate, it is best to acquire once the appraisal has been completed and price confirmed. Reach out to K2’s team of housing experts for guidance in this area.
- Rental rates have skyrocketed by a huge 17.5% on average since 2021. This is having a direct impact on transferee’s experience, as it is likely more financially beneficial to buy than rent.
iBuyers
An iBuyer is a company (or investor) that uses algorithms, technology and other means for a quick home valuation to make an instant cash offer, marketing the process as a simplified, more convenient way to sell a home.
- In the fourth quarter of 2021, nearly 30% of home purchases in the US were made by iBuyers.
- Buyers are sold on the process of iBuyers because of the quick and easy cash offers. However, some are unaware that on average, iBuyers can charge around 13-15% of the home sale’s price (an agent typically costs around 5-7%).
- It is important to educate transferees on contact nuances, as iBuyers often hold hidden charges, such as administrative fees, inspection deductions and non-competitive home valuations.
- For those considering iBuyers, we would strongly recommend that you determine all closing costs upfront.
Mortgage rate changes and impacts
- Mortgage rates are on the rise, as we see rates double over the space of a year (Summer 2021, 2.5% vs Summer 2022 5.5-6%).
- K2 have established partnerships with several national lenders who offer competitive rates for relocating employees. Find out how K2 can help here.
The session drew to a close with a final group discussion from our audience on whether their mobility programs had begun to incorporate mortgage subsidiary policies for transferring employees amidst the challenging housing market, with the general consensus being that this was something that may need to be explored in the near future.
What’s next?
If you are interested in attending the next US Virtual Corporate Round Table which will take place in fall, please reach out to Brad Shepard to reserve your seat today. More details for the next VRT will shortly follow on our events page.
