Mixed housing stats

mixed housing stats
Mixed housing market stats (infographic from keepingcurrentmatters.com)

This week’s National Association of Realtors press release (nar.realtor) sends mixed signals about the housing market.  Reports of sluggish home sales and slowing home price appreciation is not what you would expect when the spring market should be humming along.  But then again, mixed housing stats may be a vital sign of a healthy market in motion.

First, let’s talk about home sale prices.  The NAR’s report on metro home prices and affordability indicate that the average home sale price for the first quarter of the year was $254,800.  This is a 3.9 percent increase compared to the same time last year.  Average home sale prices in the Baltimore metro area were slightly higher than the rest of nation at $275,300.  Not surprisingly, Washington metro prices were significantly higher at $420,000 (a 6.5 increase from the same time last year).

The latest S&P CoreLogic Case-Shiller U.S. National Home Price Index (spindices.com) is almost spot on with the NAR, indicating a 4 percent increase in home sale prices nationwide.

Affordability is always a concern when mixed housing stats confound the market. So, how much income do you need to qualify for a home?  The National Association of Realtors Qualifying Income report indicates the average qualifying income for a 5 percent down conventional mortgage is $60,143 nationwide.  The average qualifying income in the Baltimore metro area is slightly higher at $64,982.  However, because of significantly higher home sale prices, the average qualifying income in the Washington metro area is $99,137. 

The neighboring Baltimore and Washington metro areas highlight home pricing extremes in competing markets.  Many home buyers who work in the Washington metro area are opting for longer commutes to make homeownership affordable.  Others are opting for alternative work to not only lower their housing cost, but eliminate the commute as well.  Commenting on affordability, NAR’s chief economist Lawrence Yun stated, “There are vast home price differences among metro markets. The condition of extremely high home prices may not be sustainable in light of many alternative metro markets that are much more affordable. Therefore, a shift in job search and residential relocations into more affordable regions of the country is likely in the future.”

Although home sale prices continue to climb, the national home sale picture is another story.  The 1.2 percent increase in spring home sales compared to winter sales should be expected.  However, the 5.4 percent decrease from last spring is a disappointment.  According to MarketStats by ShowingTime (getsmartcharts.com), the number of homes sold in the Mid-Atlantic region decreased 4.77 percent year-to-date.  There was a larger decline in Montgomery County, where there was a 7.25 percent decrease in home sales year-to-date! 

Days-on-market is another fundamental indicator of the housing market.  And, like home prices and units sold, days-on-market can vary depending on the local market.  Homes in the Mid-Atlantic region are taking a bit longer to sell, as days-on-market increased 7.04 percent to 76 days.  However, houses in Montgomery County are selling quicker, where days-on-market decreased about 13 percent to 65 days. 

Mixed housing stats can confound home buyers, sellers, and their agents. But consider the analysis of David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. He stated that that home sale prices gains have been slowing down until recently.  And although mortgage rates are lower, home sales have “drifted down” from their peak during February 2018.  Even new home sales and residential investment have shown weakness since last year.

Original published at https://dankrell.com/blog/2019/05/20/mixed-housing-stats/

By Dan Krell
Copyright © 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Buy vs rent market

buy vs rent
Buy vs Rent Housing Market (infographic from keepingcurrentmatters.com)

After last year’s active spring, the housing market’s fall home sale decline shocked many.  Although home sales were on target to outpace the previous year’s activity, the slowdown diminished the spring’s impact.  In fact, the National Association of Realtors (nar.realtor) January 22nd press release indicated a sharp decline of home sales during December.  The 6.4 percent month over month nationwide decline should not have been a surprise because of the season.  However, December’s nationwide 10.3 percent sales decline from the previous year is significant.  The Greater Capital Area Association of Realtors (gcaar.com) indicated that Montgomery County single family home sales decreased 12.2 percent during December. Is this an indication of another buy vs rent market?

Back in August, I predicted and discussed the causes for the fall’s sales slowdown.  Among the issues that contributed to the slowdown include increasing mortgage rates and the continued home sale inventory shortage. However, it’s important to note that although home sales seemed to go to sleep during the early winter, home sale prices continue to increase.  It’s not the 4-5 percent price gain that home owners have become accustomed.  But the 2.9 percent nationwide price increase (2.7 percent increase in Montgomery County) during December is indicative that home ownership is still valued.

Although there are many who are saying it’s now a buyer’s market, it’s not entirely true.  The current housing environment has home buyers under pressure.  Increasing mortgage interest rates are making buying a home more expensive, and there are not many homes from which to choose.  Consequently, motivated home buyers who are eager to buy a home during the winter are pushing back against high home prices.  The reality is that home sellers will remain in the driver’s seat as long as they price their homes correctly.

There is a lot of promise for the spring, but it still depends on many factors (such as inventory).  But the push back on increasing home prices will likely continue, as home buyers are increasingly sensitive to housing costs.  “Buy vs rent” and housing affordability will once again become hot topics this spring. 

Buy vs rent is on the mind of home buyers. Although buyers are in the market to buy, there is no urgency. However, it’s clear that this market is about value.

If you’re a home buyer trying to figure out the market, consulting with a professional Realtor can help you decide if it’s the right time to buy a home.  Trulia’s Rent vs. Buy Calculator (trulia.com/rent_vs_buy/) is a tool that compares the cost of buying to renting a home over time in a specific area.  It can estimate the point at which home buying is better than renting.  However, depending on your budget and area, renting may be a better financial option.  Montgomery County Department of Housing and Community Affairs (montgomerycountymd.gov/DHCA) and the Housing Opportunities Commission (hocmc.org) offers affordable housing programs for first time home buyers and renters.

If you’re a home seller, think back to the 2014 spring housing market when home buyers pushed back at the sharp home price gains of 2013.  It’s recommended that you don’t take home buyers for granted, buyers are just as savvy as you.  Keep in mind that buyers are thinking about “buy vs rent.” Don’t over-price your home, however expect to negotiate the price.  Make your home show its best through preparation and staging.  Stay away from cheap renovations meant to look expensive, this can actually decrease your home’s value.  If you’re selling “by owner,” consider consulting a staging professional to help prepare and stage your home.  If you’re listing your home with a Realtor, your agent should have a strategy to sell for top dollar in this market. 

By Dan Krell. Copyright © 2019.

Original published at https://dankrell.com/blog/2019/01/25/buy-vs-rent-housing-market

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Real Estate Thanksgiving

real estate thanksgiving
A Real Estate Thanksgiving

Thanksgiving is a time to take stock and be thankful.  Although the original Thanksgiving may have had a religious purpose, today’s secular holiday is about traditions.  However, it seems as if the tradition of enjoying a peaceful meal with family and friends has been increasingly difficult over the past few years.  But since the election is over, let’s try to talk about something worthy of discussion (at least until the next election cycle begins), such as real estate and housing. Yes, it’s a “Real Estate Thanksgiving.”

Why shouldn’t we focus on something we all can get behind? There is a good chance that your dinner guests will include someone will be moving next year.  Whether they are buying, selling, or renting a home, someone at the dinner table will be affected by such issues as housing affordability, mortgage rates, and availability of homes.

Things to talk about during your Real Estate Thanksgiving might be about mortgages, home sales, home prices, rent, maintenance, etc.  The topics are seemingly endless.

Talking about mortgages during the Real Estate Thanksgiving.  The current news is about mortgage interest rates.  How high will mortgage rates go?  Housing experts agree that mortgage rates will likely be about 5 percent next year (although the Fed just announced they may hold off on interest rate hikes after spring).  Paying more interest on your mortgage may not be your idea of positively affecting home sales.  However, increasing mortgage rates typically moderate home price growth because of affordability.  Another silver lining of increasing interest rates is a stimulated lending environment.  As a result, mortgage companies will likely further loosen lending requirements, which will increase the home buyer pool.

Real Estate Thanksgiving and home sales could focus on the reasons for the fall slowdown.  Will home sales rebound this spring?  You’re probably aware that home sales have dropped off during the fall.  Major media outlets have grasped the news and created the meme depicting “housing bubble 2.0.”  You can’t really blame them because there are many economists who are projecting bleak home sales to continue through spring.

The main reason for a disappointing 2019 forecast given by many industry insiders is affordability.  I contend that this rationale is shallow and one-dimensional.  There is no doubt that rising interest rates and increasing home prices are on the minds of home buyers.  However, the lack of home sale inventory is a dimension that is often forgotten when discussing home sales and rentals.  The lack of available homes for buyers and tenants to choose has forced many into fierce competition.  The result has been upward pressure on home prices and rents.

You have to also consider the economy at your Real Estate Thanksgiving. The strength of the economy is an aspect affecting the housing market that many haven’t discussed.  Whether you want to admit it or not, the economy is the strongest it has been in decades.  Consumer outlook is optimistic.  Home buyers and renters have expressed confidence about their job prospects too.  Employers are competing for talent, influencing the highest wage increases in over a decade.

Commenting on the economy, First American chief economist Mark Fleming believes that the economy will be a major force in the housing market (How Will a Potential September Rate Hike Impact Existing-Home Sales?; blog.firstam.com; September 18, 2018).  One of the features of his analysis for 2019 is “It’s the Economy and First-Time Home Buyer Demand, Stupid.”  He described a pent-up demand from a wave of millennial of first-time home buyers who will be in the market next year.

Fleming explained that home sales slump during an adjustment period that home buyers undergo when interest rates increase.  The same thing occurred in 2010 when rates increased from 4.5 to 5 percent.  However, the economy was struggling at that time, and home sales were stagnant.  Fleming described First American’s positive housing forecasts overcoming rising interest rates, saying,

“According to our Potential Home Sales Model, the boost from the strong economy and first-time home buyer demand should overcome any downward pressure from rising rates on home sales.”

Original article is published at https://dankrell.com/blog/2018/11/21/real-estate-thanksgiving/

By Dan Krell. Copyright © 2018.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Housing inventory crisis?

housing inventory

The low housing inventory crisis has plagued the housing market for about six years.  Low inventory has frustrated home buyers and all but eliminated move up home buyers.  The ongoing housing inventory crisis is an obstacle to a balanced housing market.

As a result of the ongoing housing inventory crisis, existing home sales may see a decline in the next few months, when spring sales should be strong.  Seasonal increases are a given, as National Association of Realtors (nar.realtor) data indicated a 3.0 percent month-over-month increase for February existing home sales and a 3.1 percent month-over-month increase in the Pending Home Sale Index (the Pending Home Sales Index is a forward-looking dataset indicating the number of homes that are under contract).  However, February sales only increased 1.1 percent from last year.  But the tell of slowing activity is the 4.1 percent decrease in pending home sales from last year.

Most experts blame the sluggish home sale activity on low housing inventory.  NAR’s reporting that February’s seasonal month-over-month 4.6 percent increase of total housing inventory is expected.  However, the 8.1 percent decrease in housing inventory compared to last year is worrisome.

The Greater Capital Area Association of Realtors (gcaar.com) March 2018 data for single family home sales in Montgomery County indicated a decline in activity across the board.  Listings decreased 11.1 percent month-over-month and 7.8 from last year.  Contracts decreased 6.6 percent month-over-month and 6.9 percent from last year.  While closings only decreased 3.8 percent month-over-month, there was a 7.8 percent decrease from last year.

Another sign that that the housing market is in crisis is last week’s announcement from Zillow.  If you have not yet heard, Zillow is expanding their Instant Offer program and plans to jump into the housing market (zillow.com).  They plan to fix and flip homes by making cash offers and buying houses like other investors who participate in their IO program. The homes will be listed for sale with real estate agents who subscribe to Zillow’s Premier Agent program, as well as select partner brokers.

Zillow Chief Marketing Officer Jeremy Wacksman stated,

“Even in today’s hot market, many sellers are stressed and searching for a more seamless way to sell their homes…They want help, and while most prefer to sell their home on the open market with an agent, some value convenience and time over price. This expansion of Instant Offers, and Zillow’s entrance into the marketplace, will help us better serve both types of consumers as well as provide an opportunity for Premier Agents to connect with sellers. This is expected to be a vibrant line of business for us and for our partners in the real estate industry, while providing homeowners with more choices and information.”

The venture into flipping is a huge deviation for the internet juggernaut, whose revenue is mostly generated by selling advertising and leads to real estate agents and loan officers.  The reaction in the industry is mixed, however Zillow’s stock dropped 7 percent the day after the announcement.  Critics, including experienced real estate investors, scoffed at Zillow’s ambitious plan to flip a house within ninety days.

In a market where home owners are reluctant to sell, and frustrated home buyers are dropping out, Zillow needs to find ways to increase lead generation to grow subscribers (see why tech models looking for alternate revenue).

While being ridiculed by many, Zillow’s flipping plan may be a brilliant strategy to generate home seller leads for agents.  Zillow acknowledges in their press release that “the vast majority of sellers who requested an Instant Offer ended up selling their home with an agent, making Instant Offers an excellent source of seller leads for Premier Agents and brokerage partners.”  If Zillow’s plan works, it could also grease the wheels of the housing market by turning reluctant home owners into sellers.

As a home seller, the home sale inventory shortage limits your competition.  But be aware that it’s not entirely a seller’s market.  Your home’s condition can significantly lower the sales price, or even prevent a sale.  Serious consideration should also be given to your listing price.  Additionally, you should focus your attention to preparing your home to show to home buyers.

By Dan Krell
Copyright © 2018

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Vacation homes declining

vacation homes
Vacation homes sales decline (infographic from nar.realtor)

According to the National Association of Realtors 2017 Investment and Vacation Home Buyers Survey (nar.realtor), last year’s vacation home purchases plunged 21.6 percent!  Last year’s decline in vacation homes sales comes at the heels of a huge drop in 2015, and has tumbled about 36 percent since the post-recession high marked in 2014.  Are the statistics telling us it’s a good time to buy that vacation home you have been thinking about?  Or is it that Americans are rethinking their view about vacations and retirement?

Of course, Lawrence Yun, NAR chief economist, feels that the decline is due a very tight vacation homes market that may likely make a comeback in the ensuing years. In an April 11th NAR press release he stated that “In several markets in the South and West – the two most popular destinations for vacation buyers – home prices have soared in recent years because substantial buyer demand from strong job growth continues to outstrip the supply of homes for sale. With fewer bargain-priced properties to choose from and a growing number of traditional buyers, finding a home for vacation purposes became more difficult and less affordable last year.”  He added, “The volatility seen in the financial markets in late 2015 through the early part of last year also put a dent in sales as some affluent households with money in stocks likely refrained from buying or delayed plans until after the [2016] election.”

However, another explanation given by the NAR is short term rentals, including airbnb.  Short term rentals allow people to visit vacation and resort towns without committing to buy a home.

To give perspective about the tight vacation homes market, NAR stated that vacation home sales were only 12 percent of all transactions in 2016, a decrease from 16 percent in 2015 (and close to the recent low of 11 percent in 2012).  Additionally, low vacation home inventory pushed sale prices higher.  The 2016 median vacation home price increased 4.2 percent, which is a decade high of vacation home price growth.

A lack of inventory and rising home prices are sure to put a damper on the vacation homes market.  But the slump could be a manifestation of something else.

Bloggers and columnists have reported a shift in the younger generation’s home buying habits for about a decade.  The trend seems to be a rejection of the accepted industry standard home buying cycle set by older generations.  For decades, the Baby-Boom generation has set the bar for home sales.  Their views on home ownership and vacation homes have guided the experts.  However, millennials have a different perspective, having a more conservative take on home buying and exhibiting a strong sense of value.

The NAR’s 2017 Investment and Vacation Home Buyers Survey pointed out that that the top two reasons to purchase a vacation home are for a family retreat and for retirement.  However, just like the trend in home buying, millennials are redefining their retirement and vacation needs.

Expecting to work longer, Millennials’ idea of retirement is not perceived the same as the Baby-Boomer’s vision of retirement.  Staying relevant and engaged is now more important than leisure.

Having a regular spot for the family to congregate and vacation is no longer highly desired.  Millennials want the option to travel rather than visiting the same vacation spot every year.  Millennials are also savers. They may view vacation homes as exorbitant and expensive.  Even though the vacation is only a small portion of the year, there are regular expenses that may include a mortgage, property taxes, HOA fees, and maintenance.

Original published at https://dankrell.com/blog/2017/07/23/vacation-homes-declining/

Copyright© Dan Krell
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