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.

Great time to buy a home

great time to buy a home
Should I Buy Now or Wait? (infographic from keepingcurrentmatters.com)

If you’ve been waiting to buy a home, now may be your time to jump into the market.  Maybe you’ve been wary of home prices, or concerned about mortgage rates.  Maybe you’ve been attempting to “time the market” to get a good deal on a home.  Regardless of your reason for waiting to buy a home, you shouldn’t ignore the current market conditions.  It’s as if a perfect storm of home buying conditions is lining up to a great time to buy a home.

The big news is that mortgage interest rates continue to drop.  National average mortgage rates have been declining since the fall, moving closer to the historic bottom!  The May 30th U.S. weekly average for a thirty-year fixed rate mortgage provided by the Freddie Mac Primary Mortgage Market Survey(freddiemac.com) dropped to 3.99 percent.  Mortgage News Daily’s Matthew Graham reported on June 3rd that mortgage rates dropped further (mortgagenewsdaily.com).  Graham’s title “Mortgage Rates Continue to Plummet” is telling.

Although economists express confidence in the economy, they attribute the movement in mortgage interest rates to the current trade wars and bond market activity.  The mortgage industry may also be anticipating a Fed rate cut at the next week’s meeting of the Open Market Committee.

Lower mortgage rates aren’t always a reason to take the plunge into the housing market.  But what about moderating home sale prices?  The FHFA Home Price Index (fhfa.gov) indicates that nationwide average home prices increased only 1.1 percent during the first quarter of 2019!  Compared to the year-over-year 5.1 percent HPI increase, the modest first quarter gain may indicate a more affordable housing market.   Locally, the Montgomery County year-over-year average home sale price only increased 0.2 percent, according to MarketStats by ShowingTime (getsmartcharts.com).  However, the average price per square foot decreased 14.3 percent!

Another factor making it a great time buy a home is the lackluster spring home sales.  Counter to what is expected, home sales have somewhat cooled during the spring.  A May 30th NAR press release titled “Pending Home Sales Trail Off 1.5% in April” indicates that national home sales have been declining.  In fact, the forward-looking indicator based on contract signings dropped 1.5 percent this past month.  The total pending home sales in Montgomery County dropped about 2.8 percent compared to last spring. 

There are increasingly more housing choices.  Although housing supply remains tight, there were about 2.5 percent more new listings this April compared to the same time last year.  Although many of these new listings go quickly, increasing new listings mean that there are more home sellers that are entering the market this year giving you more homes to consider.

Putting all the data points together signify a great time to buy a home.  Housing affordability has increased, partly due in part by increasing family incomes, lower mortgage rates, and moderating home prices.  Home sellers who are listing their homes for sale this spring are adjusting their sale price expectations.  Homes that have been on the market for an extended time may be an opportunity for you to negotiate a lower sale price.  According to mortgage experts, average mortgage rates have “plummeted,” giving you more flexibility and possibly lower housing costs. 

These home buying conditions may not last very long. But before you decide to buy, determine if buying a home is the right choice by consulting a Realtor and other financial professionals.

Original located at https://dankrell.com/blog/2019/06/08/great-time-to-buy-a-home/

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.

Embrace millennials for prosperity

embrace millennials
Generational shifts (infpgraphic from nar.realtor)

Montgomery County Executive Marc Elrich’s recent remarks about millennials and housing doesn’t just speak volumes about politics and elected officials, but possibly reveals the future of housing and business in Montgomery County MD.  His “slip of the tongue” opposing building housing for millennials was not taken lightly and received plenty of pushback.  To be fair, Elrich has clarified his statement and is making amends (hamzakhan.me/blog/2019/1/26/mocowatch-elrich-meets-with-millennial-activists) by meeting with millennial activists who reside in the county.  Elrich should consider it a defining moment of his tenure and take the opportunity embrace millennials and the businesses that employ them to address the county’s housing and economic issues.

Millennials shouldn’t be pigeonholed just because their generation is misunderstood.  According to the National Association of Realtors, millennials are the largest segment of home buyers.  They account for more than one third of nationwide home buyers (Millennials Want the ‘Anti-Suburb Suburb’; magazine.realtor; February 26, 2016).  Jessica Lautz, NAR’s managing director of survey research stated, “Their buying power is huge…They are definitely a force in the market. They are overtaking the baby boomers.”

Affordable housing is an issue for every generation, including millennials.  According to the NAR, eighty-six percent of millennials “believe that buying a home is a good financial investment.”  However, like all home buyers, millennials are facing low home sale inventory, increasing home prices, and rising rents.  Additionally, many millennials have the heavy burden of student loan debt, which stifles their ability to rent, as well as save for a down payment to buy a home.  To put this into perspective, consider Zack Friedman’s report for Forbes indicating student loan debt approaches $1.5 trillion (Student Loan Debt Statistics In 2018: A $1.5 Trillion Crisis; forbes.com; June 13, 2018).  This makes student loan debt the “second highest consumer debt category” (mortgage debt is first). 

Embrace millennials to address housing issues

Millennials don’t expect cities to tear down older affordable housing to build new homes for them.  It’s quite the opposite.  As was reported by NAR research cited above (Millennials Want the ‘Anti-Suburb Suburb), many millennials are moving out of the city and opting to live in more affordable suburban neighborhoods. Instead of tearing down homes and disrupting communities, millennials are revitalizing older homes and invigorating forgotten neighborhoods. 

It has been established that millennials are currently driving the economy of housing, and they should not be dismissed.  According to the National Association of Realtors 2018 Home Buyer and Seller Generational Trends study (nar.realtor), millennials have been the most active generation buying homes for the past five years.  Millennials represented more than one-third of all home purchases in 2018.  It was pointed out that the number of millennials buying homes in urban areas is declining.  After peaking at 21 percent in 2015, only 15 percent of millennials purchased in an urban area during 2018 (only 2 percent buying a condo).

Embrace millennials to address economy

The millennial shift toward the suburbs is affecting business too.  Jim Fagan recently wrote about businesses chasing millennial talent (Millennials are re-migrating to the suburbs and their employers are following; westfaironlline.com; September 14, 2018).  He observed that as millennials are moving out of urban areas, their employers are following them.  Just as millennial migration is affecting residential real estate, it is also affecting commercial real estate and the urban landscape .

Demographics are not static and affect housing and the economy.  Millennials are a driving force in today’s housing and labor markets.  If Elrich is to address the county’s economy and housing issues, he should embrace millennials and the businesses that employ them.

By Dan Krell. Copyright © 2019.

Original published at https://dankrell.com/blog/2019/02/08/embrace-millennials-economic-prosperity/

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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.