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.

Housing Market Pause, Slowdown, or Collapse?

housing market
Work with a seasoned professional to help navigate the local market

Is the housing market in a pause, going into a slowdown, or worse – headed for a collapse?  Looking back to an article I wrote an article in the summer of 2018 asking the same question, we were at a similar point then and asking the same questions. Just like today, the summer of 2018 saw decreasing home sales after a sellers’ and sharply rising home sale prices.  Instead of being in full swing, the housing market of the summer of 2018 was cooling down. 

During that time, it was common place to hear about the impending doom and gloom in a housing collapse from the media.   In hindsight, what occurred that summer was a normal reaction to an overheated market where stressed home buyers basically took a break. Even with the short pause, the housing remained an active and viable aspect of the US economy. 

Housing, like other facets of the economy, go through cycles of boom and bust.  Most are familiar with the extreme boom and bust cycles, such as what occurred during 2005-2007.  However, many are unfamiliar with the concept of the mini-cycle.  The mini cycle is a period of short-term growth and slowdown, modulating to maintain a relative balance. Instead going through a protracted cycle of expansion, hyper-supply, and recession, the housing market could be correcting itself via mini cycles

Prior to the lockdowns of 2020, the housing market was in the process of correcting itself from sharp home price increases during a hot 2017-2018 market.  At that time, home sale inventory was already at historic lows (which began in 2013).  As you can understand, the lockdowns further exacerbated the home sale inventory shortage and pushing the housing market and home buyers into an unprecedented situation.  The double-digit multiple offers and six-figure escalations pushed home buyers to the edge, exhausting and discouraging many.

After a year and a half of sensational activity and home price gains, it’s not unthinkable that home sales would correct itself.  As reported in the June 21st National Association of Realtors press release (https://www.nar.realtor/newsroom/existing-home-sales-fell-3-4-in-may-median-sales-price-surpasses-400000-for-the-first-time), May 2022 home sales decreased 3.4 percent from April, and decreased 8.6 percent from May 2021.  Home sale inventory continues to increase, and was reported to be about 2.6 months of supply, which gives home buyers more opportunities.

Home prices, on the other hand, continue to increase.  As reported in the NAR press release, median home prices are 14.8 percent higher than a year ago! The $407,600 median home sale price is the first time the median sale price exceeded $400,000. 

Of course, housing is also affected by outside economic factors, which are concerning to everyone.  If you are in the market to buy or sell a home, look at the facts and make decisions that make sense for your situation. Finally, work with a seasoned professional to assist you to understand and navigate your local market.

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.

Is Upzoning the Solution?

Can zoning be the answer to solving housing shortages and increasing affordability?  Many city planners and politicians think so.  Although many localities are still considering upzoning ordinances, some have already implemented upzoning amendments that allow increased resident density.  The immediate effect is likely to be felt by the addition of housing.  However, it’s unclear how and if the additional units will relieve housing prices.  Opponents voice concern over potential long-term effects of upzoning in single-family neighborhoods. 

What is Upzoning?

upzoning
Local Real Estate (infographic from nar.realtor)

A brief description of zoning is given by the National Association of Realtors (nar.realtor) as “laws that affect land use, lot size, building heights, density, setbacks, and other aspects of property use.”  Zoning ordinances go back to the early twentieth century as a way to efficiently grow a city while protecting residential neighborhoods from industrial and commercial influences. 

Research conducted by G. Donald Jud in 1980 suggests that the absence of zoning (or loose zoning) decreases property value (The Effects of Zoning on Single-Family Residential Property Values: Charlotte, North Carolina; Land Economics; vol.56, no.2, p. 142-154).  His study concludes that residential property owners pay a premium for uniformly in land use.  Jud writes “One of the principal purposes of municipal zoning ordinances is to protect property owners from the deleterious external effects that may arise when incompatible land uses exist within the same neighborhood.”  However, he also states that in the absence of zoning protection, other mechanisms are created, such as neighborhood covenants (e.g. HOA, or civic association).

Herbert S. Swan wrote in 1949 (Economic and Social Aspects of Zoning and City Planning; The American Journal of Economics and Sociology; Vol.9, No.1, p.45-56) that efficient city planning and zoning ordinances can only be measured by their adaption to current conditions.  He stated, “Only as they meet basic requirements of present population, and the emerging needs of prospective population, can they be said to serve a community in full measure.” 

Swan’s words ring true today, as local governments look to zoning to address housing shortages and affordability.  “Upzoning” is the current trend to “meet the emerging needs of the population” to alleviate housing issues.  The city of Minneapolis and state of Oregon have already implemented new zoning that essentially eliminates single-family land use in turn for increased density.  And the trend is spreading throughout the country.  While some localities have gone to the extreme to essential ban single-family development, others are loosening zoning to allow auxiliary dwelling units (ADU).  The Virginia legislature is currently considering statewide upzoning legislation. 

Earlier this year, the Montgomery County Council loosened zoning requirements for ADUs.  Zoning Text Amendment 19-01 becomes effective December 31st 2019.  The passed amendment has additional background information, including a brief description of opposition views from residents.  Some of the concerns of increased density in single-family neighborhoods included overcrowding in schools and decreased availability of parking. Additionally, there is concern that car-choked streets could impede emergency vehicles.  Environmental concerns included uncontrolled water runoff from increased number and size of ADUs.  Opponents to the amendment also voiced concern with “the inability of the County to enforce any regulations.”

Montgomery County’s “loosened” zoning amendment is meant to increased density in single-family zoned neighborhoods.  In light of resident concerns, the Council allowed direct input from the Montgomery County Planning Board to increase the supply of accessory dwelling units in the county, “while also working to minimize any negative impacts on residential neighborhoods.” 

Original article is published at https://dankrell.com/blog/2020/02/03/is-upzoning-the-solution/

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.

More Homes for Buyers?

more homes for buyers
Strength of the housing market

If you’ve been following the housing market, you know that housing experts have been declaring a home sale inventory shortage since 2013.  In NAR’s November 27th Pending Home Sales Index release, NAR chief economist Lawrence Yun partly blamed October’s 1.7 percent decline to “inadequate levels of inventory across the country.”  He stated “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.” Essentially, there needs to be more homes for buyers.

However, if reporting holds true, the home sale shortage may be ending soon.  The most recent housing permits report indicates that more new homes will be built, while media attention to a “silver tsunami” suggest more homes for buyers will hit the market.

October’s increased housing permits suggest an increase in new homes to be built next year.  According to a recent report, housing permits reached a post-recession high (Housing Permits Surge to Postrecession High; magazine.realtor; November 20, 2019).  Although permits are just an estimate for future construction, it is nonetheless relevant because, like pending home sales, it gives a hint of the potential for future home sales.  Single family permits reached 1.46 million units during October, which is an increase of about 5 percent.  October was the second-best month for housing starts this year.

Lawrence Yun, NAR chief economist, stated, “At 1.46 million units on an annualized basis, housing permits are nearly to the level needed for the country over the long haul.  Since new-home construction kicks off the chain reaction of people trading up and trading down by buying new and selling their existing homes, more housing inventory will surely show up in the market next year.” 

Robert Dietz, the National Association of Homebuilders chief economist, commented about demand for new homes, “The increase in buyer demand is also being driven by lower mortgage rates, which has been helping to lift the pace of single-family permits since April. Solid wage growth, healthy employment gains, and an increase in household formations are also contributing to the steady rise in home production.”

What about existing homes?  According to Zillow Research, there will be about twenty million additional existing homes that will be for sale through the mid-2030’s (The Silver Tsunami: Which Areas will be Flooded with Homes once Boomers Start Leaving Them; Zillow.com; Nov. 22, 2019).  These home owners are 60 years-old or older, and will eventually sell their home because of health, retirement, relocation, and death.  There will be regional differences depending on the number of senior home owners.  Zillow indicates that the Tampa and Tucson markets are likely to be affected most.

The “silver tsunami” is not a new concept.  It was postulated in a 2012 NAR article The Boomer Effect.  The article surmised that since Baby Boomers began turning 65 on January 1, 2011, there would more homes for buyers and that the inventory would overwhelm the market.  However, we are still waiting for the tsunami. As it turned out, the post-recession economy significantly changed, as did attitudes toward housing.  Multi-generational households increased, and seniors are aging in place.

Will the anticipated increased number of new and existing homes to be sold provide the boost to home sales numbers?  Maybe, if the added inventory is attractive to home buyers.  It has been clear that home buyers will opt for value in a turn-key home.  Home sellers need to keep in mind that home buyers are looking for affordable quality homes.

Original article is published at https://dankrell.com/blog/2019/12/20/more-homes-for-buyers/

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 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.