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.

Holiday Home Selling

holiday home selling
Home staging during the holidays (infgraphic from nar.realtor).

Conventional real estate wisdom used to be that timing the market was the key to listing your home for sale.  Most home sellers tried to aim for the spring and early summer months to sell their homes.  In fact, June continues to be when most settlements occur.  However, selling strategies have changed over the last few years such that home sellers are confidently listing in the fall.  Many also hold nothing back to sell during the winter months.  But how about holiday home selling?

The holiday season is typically when the real estate industry slows to a crawl.  But it doesn’t mean that the housing market is closed!  Consider that there were 658 Montgomery County MLS listed homes that went under contract since the beginning of November.  This confirms that active home buyers are constantly searching for homes, and will certainly visit houses that are available during the holiday season.  The only obstacle for home buyers (and your home sale) is severe weather.  

Holiday home selling is not for everyone. If you have not yet listed your home for sale, you may consider waiting to list after Thanksgiving.  Or you may just decide to wait until the new year.  Your listing strategy should be based on your lifestyle.  Although the holiday season is often synonymous with joy and good cheer, many experience increased stress during this time.  If the holidays are a hectic time for you, the thought of the additional stress of selling your home may sway you to waiting the holidays out.  Keep in mind that, like any other time of the year, you still have to prepare your home for sale (which includes decluttering, repairs and staging).

If your home is already listed for sale, you have some choices.  It used to be the rule that if your home was still on the market approaching Thanksgiving that the listing would be pulled from the MLS until spring.  And as of the November 1st, 181 county homes have been pulled off the MLS.  You may decide to do the same. 

But keeping your home on the market during the holiday season is no longer taboo.  As I mentioned earlier, conventional wisdom is passé.  Some home sellers see an opportunity to sell during the holiday season as many homes come of the market.  Consider that since November 1st, there were 444 new MLS listings.  There are also another 46 homes currently listed as “coming soon.”

Obviously, if your home is vacant it’s easy to show.  However, you should still visit the home weekly to make sure it is clean and shows well.  But if you’re selling the home where you reside during the holiday season, you may want to think about showings and staging.  Talk to your agent about requiring home buyer appointments to view the home so you don’t have inopportune surprise visitors.  This will give you the flexibility and emotional space to have your home show its best while you enjoy the holidays.

What about holiday decorations and holiday home selling staging?  According to Melissa Dittmann Tracey, writing for the NAR blog (Should You Stage Homes for the Holidays?; nar.realtor; December 19, 2011), most real estate professionals tell their clients to stage with “holiday-spirit and glow.”  Although thirty-seven percent of professionals indicated that they advised holiday staging without religious decorations, twenty-eight percent advised their clients to also include their religious decorations.  Only eight percent of professionals surveyed advised to do generic staging without any holiday decorations.

Original article is published at https://dankrell.com/blog/2019/11/28/holiday-home-selling/

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.

Housing Finance Reform Time

housing finance reform
Mortgage process

Earlier this year, President Trump released a memorandum indicating the need to reform the current structure of housing finance.  Although some believe this initiative is a distraction, the reality is that housing finance reform has been in the government sights for years.  In fact, the current state of mortgage markets was only meant to be a temporary fix after the financial crisis of 2007

Housing finance reform has been a popular political subject for years.  Even before the financial crisis that resulted in the Great Recession, housing finance reform was front and center as a means to increase homeownership.  However, it wasn’t until after the financial crisis that touched off in late 2007 that Congress saw the need to make immediate major reforms to the mortgage industry.  Although a strategy was mapped out, not everyone agreed on the plan. 

One of the first steps taken by Congress was passing the bipartisan Housing and Economic Recovery Act of 2008 (HERA).  The purpose of HERA was to be a comprehensive attempt addressing the identified problems and concerns (at that time) that caused the financial crisis.  HERA created the Federal Housing Finance Agency (FHFA) to provide oversight of the Government Sponsored Entities (GSE).  Among the goals set by HERA was to “modernize” FHA and reduce Fannie and Freddie’s role in mortgage markets.  The fate of Fannie and Freddie has been debated ever since. 

The subsequent government takeover of Fannie and Freddie all but froze out any private participation in the mortgage markets.  A 2010 CBO report indicated that 90 percent of all mortgages were owned by Fannie Mae, Freddie Mac, and Ginnie Mae.  Some estimate government’s involvement has been much higher when including FHA and VA loans.   

Fast forward to March 27th 2019, when President Trump issued a memorandum on the urgency of housing finance reform.  Although the memorandum provides a rationale to change the system, the timing couldn’t be any more ideal (to help a seemingly plateaued housing market).  The President’s push for reform acknowledges the dominant role of the GSE in mortgage markets without much competition from the private sector.  The plan is to reduce taxpayer risk by expanding the private sector’s role.  Furthermore, the goal is to “modernize government housing programs, and make sustainable home ownership for American families [our] benchmark of success.”

On September 5th, the Treasury Department submitted its plan on housing finance reform.  The pan, as described by a Treasury press release (Treasury Department Submits Housing Reform Plan to President; treasury.gov)  “includes nearly 50 recommended legislative and administrative reforms to define a limited role for the Federal Government in the housing finance system, enhance taxpayer protections against future bailouts, and promote competition in the housing finance system.”

Although the result of HERA was a government monopolized housing finance industry, it was not the intention.  Housing finance reform means returning to a competitive market that includes the private sector.  However, it does not imply the end to government participation. Prior to the financial crisis, the competitive mortgage industry helped a record number of home buyers achieve homeownership.  Reforming housing finance markets is key in returning to a stable and reliable housing market across all sectors and price points.  Housing finance reform will increase homeownership opportunities for those who have struggled with the prospect of buying a home.  And of course, home sellers will benefit from increasing numbers of home buyers entering the housing market.

Original article is located at https://dankrell.com/blog/2019/10/07/housing-finance-reform-time/

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.

Stock Corrections and Housing

stock corrections and housing
Foreign Home Buyers Investing in the USA

Each time the stock market plunges there’s speculation about a wide spread economic contagion.  Talking heads and news headlines predict doom and gloom, as well as speculating about the effects on the housing market.  Because Wall Street reacts to all types of news and events, the effect of a stock crash on the housing market can vary. But are stock corrections and housing slumps connected?

If you want to see direct effects of stock corrections and housing slumps, you need only look at the stock market corrections in 2015 and 2018. Both stock market shocks were reactions to events in the US and globally.  The extended stock sell-off during 2015 was a reaction to China’s currency devaluation as a result of their low GDP as well as poor economic data that came from the EU.  The steep equities decline that happened during August through September of that year was bad timing for the housing market, as it occurred when the fall market was gearing up.  Consumer confidence dropped and home buyers were concerned about home values. As a result, home sales slowed during the fall of 2015.

Moving forward, February 2018 is one of the most volatile trading months in recent history.  That month saw two of the largest daily losses of the Dow Jones Industrial Average (both over 1,000 points).  The market correction was due to Fed rate increases and concerns of inflation.  The stock market correction occurred before spring home buyers were out in full force, so the short-lived event had minimal effect on home sales.  Although home prices continued to post gains, existing home sales declined the second half of the year after an active spring and summer.

Are stock corrections and housing slumps connected?

This month’s stock market one-day plunge was likely tied to tariffs, trade and currency wars.  The large decline occurred after China devalued its currency so as to make its consumer goods cheaper in the face of increasing tariffs.

Regardless of the impact of equities, it’s important to point out that home sales have been inconsistent throughout the year.  A July 23rd NAR press release indicated that existing home sales are 2.2 percent lower than last year.  Chief NAR economist Lawrence Yun stated, “Home sales are running at a pace similar to 2015 levels – even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country…”   Although it may feel like we are repeating the housing cycle of 2015, it’s for different reasons.  Like then, home sale inventory is low and home buyers are anxious about increasing home sale prices.  However, differences include low mortgage rates, high consumer sentiment, and a stronger economy. 

Although the overall effects of current stock volatility on the housing market may be minimal, equities corrections are typically harsher on upper bracket and luxury homes.  Demand for starter homes will remain high, while upper tier homes will have to adjust pricing.  Yun stated “Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices…”

Although stocks rebounded the next day, we really don’t know yet if this is the beginnings of stock correction or a one-day event, so there is no way to gauge an immediate effect on home buyers.  However, A July 17th NAR report indicated that foreign home buyers have been affected by a slowing global economy and low US home sale inventory.  The NAR Profile of International Transactions in U.S. Residential Real Estate 2019 indicated a 36 percent decline of foreign investment in U.S. residential real estate from last year.  It’s likely that foreign investment may further erode as a currency war develops.

By Dan Krell
Copyright © 2019

Original located at https://dankrell.com/blog/2019/08/27/stock-corrections-and-housing/

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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 Shortage Causes

housing inventory shortage
Mover rates (infographic from census.gov)

A common complaint from home buyers is that there is lack of quality homes for sale.  A fact that most overlook is that home sale inventory has been relatively low since 2011.  The shortage has been attributed to many things including, home prices, economy, mortgage interest rates, jobs, etc.  However, a Freddie Mac report issued earlier this year pinpoints a major cause of the ongoing inventory shortage.  And according to the report, the housing shortage may get worse before it gets better.

A post-recession housing inventory shortage was actually predicted in 2010 by Brian Wesbury, chief economist for First Trust Advisers (Housing Shortage Coming In 2011; Forbes.com; February 15, 2010).  Wesbury’s industry startling prediction was based on statistics that require an average of 1.5 million homes to be added to the housing inventory each year just to be on par with population growth.  At that time, housing starts and completions were only a fraction of the 1.5 million target. 

Since then, housing market inventory has been low relative to the housing market prior to the great recession.  A lack of inventory has been attributed for inconsistent home sale stats this year, as well as previous years.  And although there have been a few years of post-recession record home sales, home sales have struggled for ten years to surpass pre-recession numbers. 

A study by Freddie Mac discusses one of the major causes of the recent housing shortage that has been impeding the real estate market, which is the growing trend of “aging in place.”  The study, published by Freddie Mac Insights earlier this year (While Seniors Age in Place, Millennials Wait Longer and May Pay More for their First Homes; freddiemac.com; February 6, 2019), is fueling an ongoing debate of the current housing inventory shortage. 

Aging in place is term given to aging home owners who stay on their homes as long as possible.  Rather than moving to retirement communities or other stereotypical older adult housing, seniors are staying put.  This trend is confirmed by a survey conducted by AARP that indicated “3 out of 4 adults age 50 and older want to stay in their homes and communities as they age” (2018 Home and Community Preferences: A National Survey of Adults Age 18-Plus; aarp.org; August 2018).

To highlight the impact of the current trend of aging in place, the Freddie Mac report pointed out that the home ownership rate for seniors aged 67 to 85 only dropped 3.6 percent, while the previous generation experienced a 11.6 percent drop in homeownership for the same age span.  A major revelation was that the current homeownership rate for seniors aged 81 to 85 is almost 15 times greater than the previous generation (for the same age span).

The Freddie Mac study looked at subdued millennial home buying trends and looked at who lived in the homes that millennials could have purchased.  The results indicated that seniors born after 1931 stayed in their homes longer, which resulted in higher homeownership rates compared to previous generations.  According to the study, “We estimate that this trend accounts for about 1.6 million houses held back from the market through 2018, representing about one year’s typical supply of new construction, or more than half of the current shortfall of 2.5 million housing units…This additional demand for homeownership from seniors will increase the relative price of owning versus renting, making renting more attractive to younger generations…

By Dan Krell
Copyright © 2019

Original located at https://dankrell.com/blog/2019/07/21/housing-inventory-shortage-causes/

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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.