Housing market trends Archives - Page 3 of 7 - Real Estate News and Commentary

October 3, 2018April 26, 2019

Winter home sale profits

If you are planning to sell next spring, don’t wait! Consider a winter home sale. A National Association of Realtors survey indicates that a surge of home sale inventory is on the horizon. The NAR third quarter Housing Opportunities and Market Experience survey indicated that 77 percent of Americans believe it to be a good time to sell (Homeowners Ready to Sell in the Third Quarter of 2018, says Realtor Survey; September 25, 2018; nar.realtor)! This happens to be a record high for the survey. NAR Chief Economist Lawrence Yun believes that the strong sentiment is due to recent home price appreciation. He stated:

“Though the vast majority of consumers believe home prices will continue to increase or hold steady, they understand the days of easy, fast gains could be coming to an end. Therefore, more are indicating that it is a good time to sell, which is a healthy shift in the market.“

A winter home sale has less seller competition

The housing market conditions are such that we are on the verge of experiencing a déjà vu. Two years ago, winter home sales were fueled by rising mortgage interest rates, low inventory and pent up demand. As I predicted in a November 2016 column, rising interest rates and pent up demand were credited for the almost 10 percent jump in home sales by the end of January 2017! The massive jump in home sales occurred during the deep winter, when existing home sale inventory dropped about one-third of the summer inventory. Sellers who had a winter home sale during 2016-17 were greeted by eager home buyers and faced little competition.

Fast forward to 2018. Yes, admittedly, home sales have slightly dropped off during summer. But many are attributing this phenomenon to the lack of inventory. Consider that Montgomery County existing single-family home sale inventory was almost 20 percent lower than that of the summer of 2016. Although summer home sales dropped off, indicators point to a hot winter housing market. Moderating home prices, combined with pent up buyer demand and a strong economy could make a winter home sale ideal.

It’s clear that home buyers facing rising interest rates have taken a pause. But as rates approach 5 percent, positive economic sentiment is lessening the shock and many are planning to buy before rates creep higher. Giving perspective to the mortgage rate hysteria, current mortgage rates are about the same as they were during 2014. Additionally, the last time we saw mortgage rates above 5 percent was in 2010. Rates exceeded 6 percent when home sales broke records during the market buildup of 2006.

Current sentiment is good for a winter home sale

Another indicator that a winter home sale may be primed is the most recent Fannie Mae Home Purchase Sentiment Index (No Thanks to Housing, Home Purchase Sentiment Edges Up; fanniemae.com; August 2018). Home buyer sentiment increased the first time since May. Economists attribute this uptick to a strong economy along with the awareness of the recent market slowdown. The job and income related index components increased significantly indicating that buyers feel financially more secure with a home purchase. There is also a belief that home prices may moderate due to the summer sales slump.

Winter home sales tend to have less competition and serious home buyers. As I said in 2016, don’t wait until spring to sell your home! If you wait until spring to list your home, you’ll be faced with a profusion of seller competition.

Original located at https://dankrell.com/blog/2018/10/03/winter-home-sale-profits/

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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.

June 28, 2018November 23, 2021

Housing market bubble hyperbole

Timing, as they say, is “everything.” Predicting the housing market is tricky. Even the best economists can get it wrong. Aptly, however, there is that group of naysayers who always believe the homes are overpriced and we are in a housing market bubble status. And you know what they say about a broken clock, it’s correct twice a day.

There’s no way around it, housing market trends are cyclical. Eventually, the housing market will crash and home prices will recede. But, like the phoenix, will again be reborn to go through it’s life cycle. According to Harvard’s Teo Nicolais (extension.harvard.edu/faculty-directory/teo-nicolais), there are four phases to the housing cycle. The cycles were described in 1876 by economist Henry George and modernized by Glenn R. Mueller to include recovery, expansion, hypersupply, and recession. Nicolais predicts that, aside from the occasional slowdown, there won’t be an honest to goodness housing crash until 2024.

You may be saying, “But Dan, the market feels just like the housing market bubble before the last crash.” And in some respect, you may be correct. At that time, home sale inventory was low, and home prices seemed on a never-ending climb. However, even though we have similar conditions, the current housing market is in a different cycle than where we were thirteen years ago.

Back in 2005 I reported that the active inventory of Montgomery County single family homes for sale for June 2005 increased to 2,004 units. Homes were selling at rapid rate, as the number of contracts increase 2.5 percent during June 2005 compared to 2004. And there was almost a 13 percent price appreciation from the previous year. The 2005 housing market was clearly in a rapid expansion phase. Oversupply began in late 2006 when Montgomery County single family home inventory hovered around 4,000 units for the better part of the summer and fall. And of course, the rest is history.

There is some disagreement about the current phase of the housing market. Some say the market is in the beginning of an expansion cycle, while others (like me) believe we are still in the recovery cycle. Yes, Inventory is tight. But as I reported recently, not all homes are selling. Which is contrary to the expansion of 2005, when it seemed as if all homes sold quickly regardless of condition. Home prices are increasing, but at a more reasonable rate than they did thirteen years ago. Although it may feel that houses sell in less than a week, the average days on market for homes that sell is currently 33 days in Montgomery County (according to MLS stats), and 78 days nationwide according to Zillow.

Another factor that is playing into current housing market conditions is mortgage interest rates. Unlike the housing market bubble of thirteen years ago, interest rates are increasing and is anticipated to help mitigate the home price spikes.

Sure, there are regional markets, such as Seattle and Denver, that lead the country in home price gains (typically double digits). But most everywhere else, real estate prices are improving gradually. Moreover, regional markets each have their own hot neighborhoods that grab the headlines too. Hot neighborhoods tend to be where investors, flippers and first-time home buyers converge.

Is there a housing market bubble? Are we headed to a market crash like we experienced in 2007? No, at least not in the short term. More likely, the market may be affected in the near future by a mild (and overdue) economic slowdown. Unfettered, the housing market will continue its herky-jerky pace.

By Dan Krell
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/06/28/housing-market-bubble-talk/

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April 28, 2017July 14, 2019

Gonzo home sales and prices

Everyone seems to be excited about this week’s Case-Shiller home price numbers reported for February. Even the title of the April 25^th press release sounded a little giddy: “The S&P Corelogic Case-Shiller National Home Price NSA Index Sets Fourth Consecutive All-Time High” (spindices.com). Yes, the Case-Shiller 10-city and 20-city composite indices are close to the 2007 level. But before you become intoxicated by reports of gonzo home sales and prices and run off to sell your home, here’s more to the story.

Gonzo home sales and prices

Gonzo home sales and prices depend on the market. According to the recent Case-Shiller release, Seattle, Portland, and Dallas topped the charts with annual index gains of 12.2 percent, 9.7 percent, and 8.8 percent respectively. Not surprisingly, Seattle and Portland have been the hottest real estate markets over the past year. Tampa’s and Cleveland’s housing markets are at the opposite end of the spectrum with decreases of -0.5 percent, -0.3 percent during February; while Miami’s home price index was unchanged. Washington DC reported an annual gain of 4.1 percent, with a 0.2% gain reported in February.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices stated:

“There are still relatively few existing homes listed for sale and the small 3.8 month supply is supporting the recent price increases. Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.
Housing’s strength and home building are important contributors to the economic recovery. Housing starts bottomed in March 2009 and, with a few bumps, have advanced over the last eight years. New home construction is now close to a normal pace of about 1.2 million units annually, of which around 800,000 are single family homes. Most housing rebounds following a recession only last for a year or so. The notable exception was the boom that set the stage for the bubble. Housing starts bottomed in 1991, drove through the 2000-2001 recession, and peaked in 2005 after a 14-year run.”

Gonzo home sales and prices are dependent on local real estate. It’s true, housing inventory is lacking. At a time when homes should be coming to market for the spring season, the Greater Capital Area Association of Realtors Montgomery County single family statistics for March 2017 indicated that there were -1.8 percent less new listings compared to the same time last year. And the total number of active homes for sale are -16.4 percent less than the same time last year. Although June is usually the peak time for home sales and prices in our area, home sales increased 17.9 percent month over month, and is 11.7 percent higher than the same time last year; while average home sale prices increased less than 1 percent (gcaar.com)!

Holy shades of 2005, Batman!

Housing stats sound eerily like those before the housing bubble crash. But this market is different in many respects. Consider that housing speculation is not as prevalent as it was at that time; homes are not being flipped in a matter of days in most areas. And home buyers are more sophisticated and savvy than they were in 2005; home buyers are more demanding, as well as sensitive to home condition and price.

Yes, it’s true that house values are increasing. Yes, home sales are breaking records. But not all homes sell. You should realize that that home sale stats includes data of homes that sell. Homes that don’t sell are not included in the numbers of closings, nor are they included in home sale prices.

Homes that don’t sell tend to be overpriced for the home’s condition, or neighborhood. Sometimes, the physical location of the house is not ideal; for example, situated next to train tracks. If you’re selling your home this year, don’t get greedy. Get a professional opinion on pricing your home correctly; over priced homes tend to not sell quickly, or not at all.

Pricing your home may not be as easy as you think. Empirical research has confirmed that there are many variables that affect sales price. Factors that impact home sale price include the home’s location, condition, amenities, and market timing.

If you want to sell your home quickly and capitalize on home sale trends: consider repairing deferred maintenance issues, making updates, and don’t take home buyers for granted. When making repairs and updates, don’t go for the cheapest quote because it will likely show. Also, make sure your contractors are licensed.

Home buyers are just as savvy as you, so any attempt to deceive will backfire and hurt your sale. Focus on broadening your home’s appeal. Consider making your home turnkey, since most home buyers are looking for a home they can move right in and without making immediate repairs and updates.

For a guide on a successful home sale, take a look at “The magic of 4 to sell a home“

By Dan Krell
Copyright© 2017

Original post at https://dankrell.com/blog/2017/04/28/gonzo-home-sales-prices/

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June 3, 2016November 23, 2021

Housing bubble countdown

The March S&P/Case-Shiller U.S. National Home Price Index (spindices.com) was announced May 31^st to reveal a 5.2% increase in home prices. Although down from last March’s 5.3% increase, home prices seem to be appreciating at a regular pace, with the metro areas of Portland, Seattle, and Denver leading the way with double digit gains (year-over-year price increases of 12.3%, 10.8%, 10.0% respectively). As home prices climb, so too are the claims that we are experiencing a housing bubble.

Those concerned about the next bubble have been ringing the alarm bells since last fall, when the combination of limited inventory, multiple offers, and rising prices created an environment in some regions that was reminiscent of the go-go market just prior to the last market bust. And like the broken watch that is correct twice a day, those naysayers may eventually be correct – but it may not be for another eight years.

How to predict a housing bubble

According to Ted Nicolais, the real estate cycle has been steady since 1800 (How to Use Real Estate Trends to Predict the Next Housing Bubble; dce.harvard.edu; February 20, 2014). Writing for the Harvard University’s Department of Continuing Education’s The Language of Business blog, Nicolais maps out Homer Hoyt’s cycles and found a regular 18-year cycle to the bubble and bust housing market (albeit two exceptions).

The 18-year cycle, as it turns out can be observed by analyzing trends. An applying Henry George’s four phases of the real estate cycle (as modernized by Glenn R. Mueller), Nicolais can determine how and when the next housing bubble will occur. (Henry George was a nineteenth century economist who studied the boom-bust cycle of the economy).

The first phase is the “recovery.” Home prices are at the bottom, and demand increases. Real estate vacancies decrease as economic activity increases, which fuels the economy.

The second phase is the “expansion.” Housing inventories dwindle, there is little is available to buy, and finding a rental becomes difficult. Nicolais explains that an issue with real estate is that once demand increases, filling inventory takes a long time. New development can take two to five years. Until new inventory is added, price growth accelerates; and rather than valued at market conditions, real estate becomes priced to future gains. During a real estate boom, people buy into the prospect of “future growth” and believe the escalating prices are reasonable.

Phase three is “hyper supply.” When the completion of new development begins to satisfy demand, inventories fist stabilizes and then swells. Price growth begins to slow. Nicolais stated that the amount of continued development will determine the severity of the impending recession; while demand is satiated, new inventory comes to market and vacancies increase. He asserted that “wise” developers stop building during this phase.

Phase four is the “recession.” New development is stopped, while projects coming to completion add to a growing inventory. Occupancy rates and prices fall; property values and profits dwindle. Developments in mid-construction may not be completed because they are no longer financially feasible.

Following the four phases and the 18-year cycle; Nicolais stated that the great recession was not caused by external forces, but rather occurred on schedule! He figures that the current housing market is transitioning from recovery to an expansion phase. And with the exception of the occasional slow down, he predicts that the next housing bubble will be in 2024.

Original published at https://dankrell.com/blog/2016/06/03/housing-bubble-countdown/

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May 6, 2016September 10, 2018

Home pricing strategy and housing market shift

home pricing strategy The apparent luxury home market collapse is most likely due to an increased inventory of luxury homes, and a lack of foreign investors (who were active in the market several years ago). The impact of reduced prices is noticeable in home price indices as well, as there seems to be a consensus that there is a hint of a slowdown of price appreciation.

Corelogic’s May Home Price Insights (corelogic.com) indicated that nationwide home prices during March increased 6.7% year over year; and projects 5.7% appreciation for next March. Additionally, the report highlights twelve states that have reached new home price highs. Month over month average home prices nationwide increased 2.1%; however next month’s projection is for a gain of only 0.7%.

April’s S&P/Case-Shiller National Home Price Index (spindices.com) indicted that February home prices increased at an annual rate of 5.3%, which is roughly the same as the previous month’s index. The hot real estate markets of Portland, Seattle, and Denver realized the highest year over year gains, growing at 11.9%, 11% and 9.7% respectively. However, the national 0.2% month over month gain was not as encouraging.

David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, provided commentary about the April S&P/Case-Shiller report, saying “…Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers…While financing is not an issue for home buyers, rising prices are a concern in many parts of the country. The visible supply of homes on the market is low at 4.8 months in the last report. Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession.”

Although the recent home price indices have not yet established negative trends, they are telling of a housing market under pressure. Local home sellers should take note that the S&P/Case Shiller Home Price Index for the Washington DC metro area indicates a month over month -0.2% (negative two tenths of a percent) change in the average home price. The Corelogic HPI Market Condition Indicator for the Washington DC-MD-VA-WV metro area is “Overvalued.”

If you are planning a home sale during the latter half of this year, you should be extra aware of the local market trends; paying attention to competition and general inventory. Home pricing strategies that were common last year may not work to your advantage. Over pricing your home could result in driving home buyers to your competition, rather than netting a higher sales price.

Original post at https://dankrell.com/blog/2016/05/06/new-home-sale-strategy-needed-as-home-prices-start-to-shift/

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