Category: Housing Market Updates

Further Proof It’s NOT 2008 All Over Again

Home sales numbers are leveling off, the rate of price appreciation has slowed to more historically normal averages, and inventory is finally increasing. We are headed into a more normal housing market.

However, some are seeing these adjustments as red flags and are suggesting that we are headed back to the same challenges we experienced in 2008. Today, let’s look at one set of statistics that prove the current market is nothing like the one that preceded the housing crash last decade.

The previous bubble was partially caused by unhealthy levels of mortgage debt. New purchasers were putting down the minimum down payment, resulting in them having little if any equity in their homes.

Existing homeowners were using their homes as ATMs by refinancing and swapping their equity for cash. When prices started to fall, many homeowners found themselves in a negative equity situation (where their mortgage was higher than the value of their home) so they walked away which caused prices to fall even further. When this happened, even more homeowners found themselves in negative equity situations which caused them to walk away as well, and so a vicious cycle formed.

Today, the equity situation is totally different. According to a new report from ATTOM Data Solutions more than 1-in-4 homes with a mortgage have at least 50% equity. The report explains:

“…nearly 14.5 million U.S. properties were equity rich — where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value…The 14.5 million equity rich properties in Q3 2018 represented 25.7 percent of all properties with a mortgage.”

In addition, according to the U.S. Census Bureau, 30.3% of homes in the country have no mortgage on them.

Almost 50% of all homes have at least 50% equity.

If we take both numbers, the 30.3% of all homes without a mortgage and the 17.9% with at least 50% equity (25.7% of the 69.3% of homes with a mortgage), we realize that 48.2% of all homes in the country have at least 50% equity.

Bottom Line

Unlike 2008, almost half of the homeowners in the country are sitting on massive amounts of home equity. They will not be walking away from their homes if the housing market begins to soften.

Posted in For Buyers, For Sellers, Housing Market Updates

24% of Renters Believe Winter is the Best Time to Buy a Home

In real estate, the spring is often seen as the ideal time to buy or sell a house. The term “Spring Buyer’s Season” exists for a reason, as renters and those looking to move on from their current home thaw out from the winter and hit the market ready to buy.

According to Bank of America’s annual Home Buyer Insights Report, 41% of renters surveyed agree that spring is the best time to buy a home. The surprising result, however, is that when ranking the seasons, winter comes in second at 24%.

In many areas of the country, the spring and summer are the most competitive seasons for buyers. Families with children often want to move over the summer to make sure that their kids are ready for school in the fall. This often leads those families who haven’t found homes to buy to push pause on their search in the fall and winter months.

This creates a great environment for buyers to find a home with less competition. According to moving.com, scheduling a move during the winter months also comes with the best price.

“If you define ‘best’ by cost then, generally speaking, you are more likely to save on a move during the late September to April window. Demand for movers usually slows down during this time frame and rates are low.”

There are also many benefits to listing your house for sale during the winter months as well!

As we recently mentioned, buyers who are out in the winter are serious about wanting to find a home, and there is traditionally less competition on the market which gives you greater exposure to those buyers.

Bottom Line

As always, the best time to buy or move all depends on each individual buyer or seller’s goals and needs. If you are one of the many who would like to make a move this winter, let’s get together to create a plan to make it happen!

Posted in For Buyers, For Sellers, Housing Market Updates

Existing Home Sales Slowed by a Lack of Listings [INFOGRAPHIC]

Some Highlights:

• Existing home sales are currently at an annual pace of 5.22 million, which is up 1.4% over last month. This reverses the six-month trend of dips in sales every month.
• The inventory of existing homes is still below the 6-month supply needed for a normal market and is now at a 4.3-month supply.
• NAR’s Chief Economist, Lawrence Yun, had this to say: “After six consecutive months of decline, buyers are finally stepping back into the housing market. As more inventory enters the market and we head into the winter season, home price growth has begun to slow more meaningfully. This allows for much more manageable, less frenzied buying conditions.”

Posted in For Buyers, For Sellers, Housing Market Updates, Infographics

Will Home Prices Continue to Increase?

There are many unsubstantiated theories about what is happening with home prices. From those who are worried that prices are falling (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.

However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase. It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything greater than seven months will cause prices to depreciate (see chart below).

According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).

Bottom Line

If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.

Posted in Buying Myths, First Time Home Buyers, For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers, Pricing

Are Home Prices Softening or Are They Falling?

We are beginning to see reports that more housing inventory is coming to the market and that buyer demand may not be increasing at the same pace it did earlier this year. The result will be many headlines written to address the impact that these two situations will have on home values.

Many of these headline writers will confuse “softening home prices” with “falling home prices,” but there is a major difference between the two.

The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices). This does NOT mean that prices are depreciating (falling prices).

Here is an example: Over the last several years, national home values increased by more than 6% annually. If you had a home worth $300,000 at the beginning of the year, it would be worth $318,000 by year’s end. If the appreciation rate “falls” to 4%, that $300,000 house would be worth $312,000 at the end of next year – a $6,000 difference.

The price of the home did not fall. It just didn’t increase at the level it had the previous year.

Appreciation rates are projected to end this year at approximately 5%, and then drop to somewhere between 4-5% next year. This drop in appreciation rate will cause home price increases to soften.

Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.

Bottom Line

Be careful when reading headlines that discuss home values. Some headline writers will be legitimately confused and will use the word falling in place of softening. Others will realize that the headline “Home Prices are Falling!” will get more clicks than “Home Prices are Softening” and will intentionally write the more compelling headline. Read the article. If the word depreciation is not mentioned, home values are not falling.

Posted in First Time Home Buyers, For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers, Pricing

Is the Real Estate Market Finally Getting Back to Normal?

The housing market has been anything but normal for the last eleven years. In a normal real estate market, home prices appreciate 3.7% annually. Below, however, are the price swings since 2007 according to the latest Home Price Expectation Survey:

After the bubble burst in June 2007, values depreciated 6.1% annually until February 2012. From March 2012 to today, the market has been recovering with values appreciating 6.2% annually.

These wild swings in values were caused by abnormal ratios between the available supply of inventory and buyer demand in the market. In a normal market, there would be a 6-month supply of housing inventory.

When the market hit its peak in 2007, homeowners and builders were trying to take advantage of a market that was fueled by an “irrational exuberance.”

Inventory levels grew to 7+ months. With that many homes available for sale, there weren’t enough buyers to satisfy the number of homeowners/builders trying to sell, so prices began to fall.

Then, foreclosures came to market. We eventually hit 11 months inventory which caused prices to crash until early 2012. By that time, inventory levels had fallen to 6.2 months and the market began its recovery.

Over the last five years, inventory levels have remained well below the 6-month supply needed for prices to continue to level off. As a result, home prices have increased over that time at percentages well above the appreciation levels seen in a more normal market. 

That was the past. What about the future?

We currently have about 4.5-months inventory. This means prices should continue to appreciate at above-normal levels which most experts believe will happen for the next year. However, two things have just occurred that are pointing to the fact that we may be returning to a more normal market.

1. Listing Supply is Increasing

Both existing and new construction inventory is on the rise. The latest Existing Home Sales Report from the National Association of Realtors revealed that inventory has increased over the last two months after thirty-seven consecutive months of declining inventory. At the same time, building permits are also increasing which means more new construction is about to come to market. 

2. Buyer Demand is Softening

Ivy Zelman, who is widely respected as an industry expert, reported in her latest ‘Z’ Report:

 “While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets.

Indicative of this, our broker contacts rated buyer demand at 69 on a 0- 100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”

With supply increasing and demand waning, we may soon be back to a more normal real estate market. We will no longer be in a buyers’ market (like 2007-February 2012) or a sellers’ market (like March 2012- Today).

Prices won’t appreciate at the levels we’ve seen recently, nor will they depreciate. It will be a balanced market where prices remain steady, where buyers will be better able to afford a home, and where sellers will more easily be able to move-up or move-down to a home that better suits their current lifestyles.

Bottom Line

Returning to a normal market is a good thing. However, after the zaniness of the last eleven years, it might feel strange. If you are going 85 miles per hour on a road with a 60 MPH speed limit and you see a police car ahead, you’re going to slow down quickly. But, after going 85 MPH, 60 MPH will feel like you’re crawling. It is the normal speed limit, yet, it will feel strange.

That’s what is about to happen in real estate. The housing market is not falling apart. We are just returning to a more normal market which, in the long run, will be much healthier for you whether you are a buyer or a seller.

Posted in For Buyers, For Sellers, Housing Market Updates

25% of Homes with a Mortgage are Now Equity Rich!

Rising home prices have been in the news a lot lately and much of the focus has been on whether home prices are accelerating too quickly, as well as how sustainable the growth in prices really is. One of the often-overlooked benefits of rising prices, however, is the impact that they have on a homeowner’s equity position.

Home equity is defined as the difference between the home’s fair market value and the outstanding balance of all liens (loans) on the property. While homeowners pay down their mortgages, the amount of equity they have in their homes climbs each time the value of their homes go up!

According to the latest Equity Report from ATTOM Data Solutions, “13.9 million U.S. properties in Q2 2018 were equity rich — where the combined estimated balance of loans secured by the property was 50 percent or less of the property’s estimated market value — representing 24.9% of all U.S. properties with a mortgage.”

This means that nearly a quarter of Americans who have a mortgage would be able to sell their homes and have a significant down payment toward their next home. Many who sell could also use their new-found equity to pay off high-interest credit cards or help children with tuition costs.

The map below shows the percentage of properties with a mortgage in each state that were equity rich in Q2 2018.

Bottom Line

If you are a homeowner looking to take advantage of your home equity by moving up to your dream home, let’s get together to discuss your options!

Posted in For Sellers, Housing Market Updates, Move-Up Buyers

Why are Existing Home Sales Down?

The latest Existing Home Sales Report issued by the National Association of Realtors (NAR) revealed that home sales have decreased for four consecutive months and are at their slowest pace in over two years. This has some industry leaders puzzled considering the fact that the economy is strengthening, unemployment is down, and wages are beginning to rise. This begs the question: “Where are the buyers?”

Actually, agents in the field of most communities are still seeing strong desire from prospective purchasers. They have a list of potential buyers ready to go if the right houses come on the market and they claim it is not a shortage of demand, but is instead a shortage of inventory that is causing the market to soften.

Why is there a shortage of inventory?

You only need to look at the graph below to understand:

New construction sales over the last ten years are far below historic numbers from 1995-2002.

A recent industry report looked at building permits and concluded:

“If construction over the past decade matched historic norms, accounting for population change, the country would have had 2.3 million more single-family home permits.”

That decade of not building enough homes is the primary reason for the concerns about today’s market.

Wait, weren’t we talking about ‘existing’ home sales?

Some may argue that NAR’s sales report deals with existing home sales and not new construction, and they would be correct. However, reports have shown that one of the main reasons why existing homeowners are not selling is because they can’t find homes that meet the needs of their current lifestyles. Historically, the upgrades in a newly constructed home were the answers to those needs.

Over the last decade, however, there were fewer homes built to satisfy this move-up seller. Consequently, there are many homeowners who stayed in their homes for a longer tenure, instead of putting their homes up for sale.

Bottom Line

As more new homes are being built, there will be more housing inventory to satisfy current demand which will cause prices to moderate and sales volumes to increase.

Posted in For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers, Pricing

Top 3 Myths About Today’s Real Estate Market

There are many conflicting headlines when it comes to describing today’s real estate market. Some are making comparisons to the market we experienced 10 years ago and are starting to believe that we may be doomed to repeat ourselves. Others are just plain wrong when it comes to what it takes to qualify for a mortgage.

Today, we want to try and clear the air by shedding some light on what’s causing some of these headlines, as well as what’s truly going on.

Myth #1: We Are Headed for Another Housing Bubble

Home prices have appreciated year-over-year for the last 76 straight months. Many areas of the country are at or near their peak prices achieved before the last housing bubble burst. This has many worried that we are headed towards another housing bubble.

Reality: The biggest challenge facing today’s real estate market is a lack of homes for sale! Demand is strong, as many renters have come off the fence and are searching for their dream homes.

Historically, a normal market requires a 6-month supply of inventory in order for prices to rise with the rate of inflation. According to the National Association of Realtors (NAR) there is currently a 4.3-month supply of inventory.

The US housing market hasn’t had 6-months inventory since August 2012! The concept of supply and demand is what is driving home prices up!

Myth #2: The Rumored Recession Will Lead to Another Housing Market Crash

Economists and analysts know that the country has experienced economic growth for almost a decade. When this happens, they also know that a recession can’t be too far off. But what is a recession?

Merriam-Webster defines a recession as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters.”

Reality: Recession DOES NOT equal housing crisis. Many people associate these two terms with one another because the last time we had a recession it was caused by a housing crisis. According to the Federal Reserve, over the last 40 years, there have been six recessions. In each of the previous five recessions, home values appreciated.

Myth #3: There is an Affordability Crisis Looming

Rising home prices have many concerned that the average family will no longer be able to afford the most precious piece of the American Dream – their own home.

There are many different affordability indexes supported by different organizations that all measure different data. For this reason, there is a lot of confusion about what “affordable” actually means.

The monthly cost of a home is determined by the home’s price and the interest rate on the mortgage used to purchase it. According to Freddie Mac, interest rates have risen from 3.95% in January to 4.59% just last week.

Reality: As we mentioned earlier, home prices have appreciated year-over-year for the last 76 months, largely driven by high demand and low supply.

According to a recent study by Zillow, the percentage of median income necessary to buy a home in today’s market (17.1%) is well below the mark reached in 1985 – 2000 (21%), as well as the mark reached in 2006 (25.4)! Interest rates would have to increase to 6% before buying a home would be less affordable than historical norms.

The starter-home market has appreciated at higher levels (9.4% year-over-year) than any other market. One reason for this is the fact that many of the first-time buyers who have flocked to the starter-home market are being met with high competition. For some hopeful buyers, it may take more than a good offer to stand out from the crowd!

Bottom Line

There is a lot of confusion in today’s real estate market. If your future plans include buying or selling, make sure you have a trusted advisor and market expert by your side to help guide you to the best decision for you and your family.

Posted in First Time Home Buyers, For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers

The #1 Reason to Put Your House on The Market TODAY!

The National Association of Realtors (NAR) released the results of their latest Existing Home Sales Report which revealed that home sales declined 0.6% to a seasonally adjusted annual rate of 5.38 million in June from 5.41 million in May, and are 2.2% below a year ago. Some may look at these numbers and think that now is a bad time to sell their house, but in fact, the opposite is true.

The national slowdown in sales is directly tied to a lack of inventory available for the buyers who are out in the market looking for their dream homes! In fact, the inventory of homes for sale had fallen year-over-year for 36 consecutive months before posting a modest 0.5% gain last month and has had an upward impact on home prices.

NAR’s Chief Economist Lawrence Yun had this to say,

“It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels. Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

The few houses that are on the market are selling fast! According to NAR’s Realtors Confidence Index, properties were typically on the market for 26 days.

Bottom Line

If you are one of the many homeowners who is debating listing your house for sale this year, the time is now! Let’s get together to discuss the specifics of our market!

Posted in For Sellers, Housing Market Updates, Move-Up Buyers