Reading the housing stats

There has been lots of speculation about the economy and the housing market.  Reading the housing stats, there are a few similarities in today’s housing market compared to that of 2006-2007.  However, there are also many differences. 

Reading the housing stats
Home sale inventory is increasing

Of course, many of you reading the housing stats and bring up that this is as an indication of impending implosion. For example, the National Association of Realtors August 24th press release report on pending home sales indicated that pending home sales “…dropped slightly by 1.0% from June. It was the second straight monthly decline and the eighth in the last nine months.” There are however, regional differences, “Pending sales fell in three of four major regions, with the West posting a small increase. Compared to the prior year, contract signings declined by double digits in each region, with pending sales in the West down 30%.” Pending home sales is a measure of how many homes went under contract during a specified period of time.

Existing-home sales (resale homes) also declined according to the National Association of Realtors.  The NAR August 18th press release reported that existing-home sales “…fell for the sixth consecutive month to a seasonally adjusted annual rate of 4.81 million. Sales were down 5.9% from June and 20.2% from one year ago.

Although the contracts and sales are evening out, home prices continue to climb. As reported by the NAR, the median home sale price increased 10.8 percent from the same time last year.  According to National Association of Realtors Chief Economist, Lawrence Yun, “Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023. With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next yearThe ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June. Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers.

And for those of you who are interested in distressed sales, distressed sales (foreclosures and short sales) have been essentially unchanged over the last year. July sales comprised about 1% of distressed sales. 

By Dan Krell
Copyright © 2022

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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.

Local housing market changing

Lately, the housing market is definitely making noise and grabbing everyone’s attention, and not in a good way.  However, we won’t actually know how it plays out until it’s over.  As the idiom says “hindsight is 20/20.”   Nevertheless, if you’re currently in the market to sell or buy a home, pay attention to current local housing market conditions as they are critical to your decision making.

Here we go…

Changing housing market
More home are being listed for sale

The S&P CoreLogic Case-Shiller Home Price Index (spglobal.com) reported in a June 28 press release that average April 2022 home prices increased 20.4 percent from April 2021.  Tampa, Miami, and Phoenix led metro areas with 35.8 percent, 33.3 percent and 31.3 percent gains respectively.

We won’t really know if rising interest rates have any effect on home prices for several months.  Home pricing and sales data is reported in hindsight (data is reported three to four months behind).  The Case-Shiller release points out that mortgage rates just began to increase when these stats were being compiled (April).  However, the recent S&P CoreLogic Case-Shiller Home Price Index is already showing home price moderation (even before rising mortgage rates).  The Year-to Date S&P CoreLogic Case-Shiller Home Price Index for the US only shows an increase of 7.95 percent, while the 3-month index increased 6.66 percent and 1-month only increased 2.08 percent

Rising mortgage interest rates is only part of the economic story that is developing.  It was likely that home prices were already moderating as a reaction to the year and a half of sharp increases.  As I wrote last week, we are in the beginning of the shifting housing cycle.  Mixing in other economic factors, such as mortgage rates etc., can either make the housing market more sever or temperate.  And as I mentioned, we won’t know for sure until it has happened.

Bottom line

If you’re currently in the market to buy and/or sell a home, focus on the short-term local trends.  Speculation of future national home prices and home sales may be interesting, however is meaningless in the here and now.  You should hire a seasoned professional to help understand your neighborhood’s trend, as well as being informed about your potential competition and the local housing market inventory. 

If you’re buying a home, work with a seasoned real estate agent who can provide valid comps and analysis before you make an offer.  Also, consider having a thorough home inspection.  In the last year and half, home buyers felt forced to forgo the inspection to make their offer competitive.  However, in the changing market, home inspections will return.

If you’re selling a home, be aware that home pricing strategies that were lucrative last year won’t work to your advantage this year.  It’s nice to think that your home could sell for a peak price much like other neighborhood homes that sold twelve to twenty-four months ago.  However, in a changing market, overpricing your home sale could be counterproductive, driving potential home buyers to competing homes.

By Dan Krell
Copyright © 2022

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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.

Home Sale Predictions 2021

home sale predictions
Home equity 2020

Given the performance of the housing market this year, can we make home sale predictions for next year? The housing market had quite a year!  It’s amazing how resilient the market is, which demonstrates the appeal of homeownership.  Even after a significant spring slowdown, home sales rebounded to record levels in the fall.  NAR’s Existing Home Sales and Pending Home Sale Indices for October 2020 increased year-over-year 26.6 and 20 percent respectively (nar.realtor).  Even as we headed toward the holidays, NAR’s November Existing Home Sales increased 25.8 percent year-over-year.  And year-over-year median home prices increased 14.6 percent. 

While some experts expect the recent housing market activity to continue, others question if this intense home buying is sustainable.  Making home sale predictions for the new year has always been predicated on recent trends.  However, 2020 was different.  Unexpected and unusual events occurred throughout the year affecting the housing market.  First taking a pause because of an economic shock, home sales made up ground later in the year. 

Recent trends suggest that home buying will continue at a healthy rate, as long as the economy remains relatively similar.  However, being an election year there is anticipation for change.  Even many economists, who are typically ready to offer their opinion, are ambivalent about the economy.  This may suggest that the economic outlook for the near future is uncertain.

A main factor to watch in 2021, is employment.  It’s a known fact that unemployment directly effects home sales.  In periods of increasing unemployment, home sales decline.  A 2010 Florida Realtors (floridayrealtors.org) survey demonstrated a correlation between unemployment and foreclosures.  There is no coincidence that home sales strongly rebounded along with employment and the economy.  If employment remains stable into 2021, home sales will continue to over-perform. 

Other factors that will drive the housing market in 2021 include mortgage interest rates, home sale inventory, and home buyer demand. 

Mortgage rates have been relatively low since 2008.  At that time, rates hovered in the low 4’s, and were though to be “historically low.”  Also, consider that mortgage rates were in the 18 percent range during the early 1980’s.  Even during the go-go market of 2005-2006, rates hovered in the 6 percent range.  But the most recent mortgage interest rate average of 2.66 percent for a 30-year-fixed rate is described as “another record low” by Freddie Mac’s December 24th 2020 Primary Mortgage Market Survey (freddiemac.com).  If mortgage rates remain low, home buyers will be incentivized to buy homes.

Another after-effect of the Great Recession, which continues today, is low home sale inventory.  The Great Recession changed how consumers thought of housing.  Since 2008, home owners have remained in their homes much longer.  Many growing families make due with smaller spaces, rather than moving-up to a larger home.  Many older home owners are deciding to “age in place,” in lieu of down-sizing.  And telecommuting is outpacing job relocation.  Home sale inventory of non-distressed properties will continue to remain low through 2021.

There is always “home buyer demand.”  Meaning there are always active home buyers.  However, the strength of the demand varies.  Home buyer demand is typically gauged in hindsight through home sales and pending home sales.  When you combine housing stats with other factors, such as employment, economy, and mortgage rates you can estimate the strength of future home buyer demand.  If economic factors remain stable, home buyer demand will continue to be strong in 2021. 

Original published at https://dankrell.com/blog/2020/12/27/home-sale-predictions-2021/

By Dan Krell
Copyright © 2020

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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 Market 2020

housing market 2020
Real estate market (infographic from keepingcurrentmatters.com)

After the unexpected slowdown of existing home sales last fall, most real estate agents had optimism for the 2019 spring market.  However, many were surprised by the early spring reporting of mixed housing data (when all indicators should have been positive).  Although national stats for spring seemed to be pushing upward, some regional markets didn’t perform as expected (Mid-Atlantic home sales declined at the beginning of the spring).  What’s in store for housing market 2020?

Many experts cited a number of factors were to blame for the decrease in sales.  Industry experts agreed that the lack of quality homes for sale was a top concern.  In hindsight, last fall’s home sale slowdown into spring may just have been an aberration.  But it may also have been an indicator that correctly predicting the housing market is increasingly difficult and subject to local factors.  Nonetheless, economists have predictions for housing market 2020 .

At this year’s NAR’s 2019 Realtors Conference & Expo (Housing Experts Discuss 2020 Outlook, Housing Innovation at Realtors’ Expo; nar.realtor; November 9, 2019), we heard opposing views about the economic outlook and the housing market 2020 .  First, it’s not unusual to hear NAR’s chief economist Lawrence Yun to speak of the housing market optimistically.  Although he doesn’t expect a recession next year, he does caution that global economics could impact the US such that it could hamper growth.  Yun stated a common assessment by economists, which is that home sale inventory is low.  He stated “The U.S. is in need of more new housing…This is an incentive for builders to start more construction. If they do, I think we will have at least 12 consecutive years of economic expansion.

Contrasting Yun’s economic assessment, Kenneth T. Rosen, chairman of the Rosen Consulting Group, expressed a risk of a recession due to economic trade and politics.  However, Rosen conceded that as long as the job market continues to remain strong, the US economy will likely remain robust. 

Speaking of jobs and home sale inventory, a recent market assessment by Ralph McLaughlin of CoreLogic (Homeownership Rate Jumps on the Tail of Low Mortgage Rates; corelogic.com; October 29, 2019) indicated that the recent jump in the homeownership rate is an indicator that there is an “upward” trend in home buyer demand.  The 1.4 million new home owners in 2019 is a taken as a positive sign that buyer demand remains high, and is expected to drive the housing market in 2020.  However, just like earlier this year, low home sale inventory and “underbuilding” could damper next year’s home sales stats.   

So, demand for housing will be strong next year, but what about home prices…

Molly Boesel of CoreLogic reported on home sale price growth and expectations for the housing market 2020 (Home Price Growth Regains Momentum; corelogic.com; November 5, 2019).  September’s 3.5 percent CoreLogic’s Home Price Index (HPI) increased slightly from August, which continues the six-month increase of home price growth.  The steady increase in national home prices indicate a “regained momentum.”  CoreLogic forecasts national home prices to increase 5.6 percent for September 2020.

The S&P Case Shiller Home price Index (spindices.com) corresponds with current national home price growth with a 3.2 percent September index, which is higher than August’s 3.1 percent index.  However, future home price growth may depend on regional shifts in home sales and job opportunities.  Seattle and Las Vegas dropped out of the top four cities, as it was noted the “hot housing markets” are now in the southeast markets of Charlotte, Tampa, and Atlanta. 

Original article is published at https://dankrell.com/blog/2019/12/05/housing-market-2020/

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.

Downsizing myths debunked

Downsizing
Rethinking downsizing due to generational trends (infographic from nar.realtor).

Downsizing was once thought of as a rite of passage for empty-nesters and retirees.  It was considered the next stage of homeownership after enjoying the big house and puttering in the yard.  But everything you thought you knew about downsizing is probably stereotyped and incorrect. Housing and generational trends has everyone rethinking their downsizing plans.

Results of a recent survey that was conducted on behalf of Del Webb, a developer and builder of active adult communities, revealed that a majority of 50 to 60-years-olds are not planning to downsize (pultegroup.com).  A majority of the survey’s respondents who are planning a future move indicated that they don’t intend to move into a smaller home. 

Many older adults are actually are looking for a larger house! In fact, 71 percent who plan a future move want a single-family home, and 63 percent desire a home with three or more bedrooms.  These results may be due in part to multi-generational and cohabitation housing trends.  Many of the 50-year old’s who took part in the survey indicated they planned to buy a home that can also house their parents.

Jay Mason, vice president of market intelligence for PulteGroup, the nation’s third largest homebuilder and owner of the Del Webb brand, stated in the press release, “Rather than staying put, today’s 50- and 60-year olds are thinking ahead to their next big move.  While millennials seem to make the headlines, there are over 140 million Generation X and baby boomers in the United States, many with the means, confidence and desire to stay active in the housing market.”

Mason described a majority of GenXer and baby-boomer respondents as “looking for a different quality of life when considering their next move.”  Of those planning a move, 87 percent are leaning towards a suburban or rural area. More specifically, 60 percent described their next home as a “quiet, tranquil place where they can slow down and get some peace.”

Downsizing is a housing trend that is building momentum in younger generations as well.  Many home owners who thought of having a large home and yard are rethinking their lifestyles.  By reducing the time and costs of maintaining a large home and yard, they are able enhance their daily lives.

A major consideration is that downsizing doesn’t always reduce housing costs.  It is possible that the newer condo (or house) you’re considering to purchase may actually cost more than the sale price of your current home.  Besides the actual cost of the home, there are also associated costs of homeownership.  For example, the property tax of your new home could be more than what you’re currently paying.  Additionally, it is likely that your new home may have the additional cost of an HOA or condo fees.

Downsizing also doesn’t mean that you have to buy your next home.  A Realtor Magazine news article (More Older Home Owners Choose to Rent; magazine.realtor; January 12, 2016) cites US Census data that indicates half of the home owners aged 55-64 are either staying in their current homes, or deciding to rent instead of purchasing another one.

Are you thinking of downsizing?  Downsizing requires planning, not just about where to live but also considering the disposition of your current home.  To help you decide if downsizing is in your future, consult with your CPA and/or financial planner to help you understand the costs of downsizing.  To understand the current housing market and sale prices in your neighborhood, consult a local Realtor.

Original located at https://dankrell.com/blog/2019/06/24/downsizing-myths-debunked/

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.