Home selling 2023

Memory is flawed and I believe that people forgot what the housing market was like prior to 2020. People were told that the housing market of 2019 was in a new normal, and, yes, signs were pointing to a balanced market. Then 2020 shocked the housing market, and everyone took a short break during the health crisis. After a short market shock, home buyers came back in droves and further stressed the already limited home sale inventory. And for almost two years, a crazy and sometimes irrational sellers’ market was the “new normal.” What will be the new normal for home selling 2023?

home selling 2023

Besides quick home sales, home sellers have also become accustomed to double-digit home sale price growth.  However, steep interest rate increases have seemingly cooled home buyer motivation. Home sales dropped to their lowest levels in a decade. The question that everyone seems to be trying to answer is how will the current conditions play out.

Supply and demand. The one aspect, in retrospect, that has driven the housing market since 2013 is home sale inventory. Home sale inventory never completely bounced back to equilibrium levels since then, and sparked the several sellers’ market mini-cycles in the past decade.

Chief economist for the National Association of Realtors, Lawrence Yun, agrees, saying in a recent NAR new release “For most parts of the country, home prices are holding steady since available inventory is extremely low. Some places are experiencing price gains, while some places, most notably in California, are seeing prices pull back.”

Yun commented that the sharp mortgage rate spike since January has definitely impacted the volume of home sales this year. However, talking about home sale inventory, he stated, “Housing inventory is about a quarter of what it was in 2008,” Yun said. “Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing crash. Short sales are almost impossible because of the significant price appreciation of the last two years.”

Yun anticipates home sales to continue to decline about 7 percent in 2023, however, national median home prices will modestly increase in the range of 1 percent.

Home selling 2023: If you’re planning a home sale in next year, make certain you have a reasonable home sale strategy. Make certain you prepare you home by decluttering and making necessary repairs. Pay close attention to neighborhood home sale trends. And don’t overprice your home when choosing a list price.

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.

Outperforming the housing market

In 2011 I wrote an article exploring the question of outperforming the housing market by attempting to time real estate transactions. The question was then aimed at home buyers and sellers. New research published in the Journal of Real Estate Research reveals more interesting data as it relates to real estate investors.

outperforming the housing market
markets are cyclical

In my 2011 analysis of research and data, I discussed why attempting to “time the market” as an owner occupant wasn’t very favorable. It appeared as if attempting to time a purchase or sale didn’t yield the desired result. The conclusion was that long term home ownership was probably better than speculating on buying and selling homes on the exact bottom or top of the housing market.

Likewise, home sellers waiting for the housing market to rebound before making a move probably missed an opportunity as well. So, who is outperforming the housing market?

A recent article published by Wong, Deng, and Chau in the Journal of Real Estate Research (Do Short-Term Real Estate Investors Outperform the Market?; 2022, Vol. 44 Issue 2, p287-309) reveals an interesting conclusion.

The study attempted to further look into the incentives of short-term real estate investors, specifically how various market conditions affect short-term real estate investor performance. The study analyzed real estate transaction data from Hong Kong and found that three economic conditions were favorable to the investor’s performance that seem to mimic the current low-inventory market we are experiencing here. The three items that help the investor performance are: 1) having few sale comparables; 2) having sale prices of the comparables dispersed; and 3) market prices go down. The study’s conclusion is that buying and reselling withing three months generates a gross return that is 6 percent above market appreciation. The authors caution that their study is limited such that there are multiple investor strategies that need to be studied as to the effects on short-term real estate investor performance. They describe short-term real estate investors as engaging in arbitrage, which by definition is basically “home flipping.”

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.

Perception of a housing crisis

If you’ve watched the news lately, you might get the feeling that the housing market is imploding.  Unfortunately, the talking heads are reporting the titles of the news releases, such as the October 20th National Association of Realtors press release headline “Existing-Home Sales Decreased 1.5% in September,” without delving into the details. Like anything else that’s reported, just parroting a headline doesn’t tell the entire story. Get the big picture and avert the perception of a housing crisis.

perception of a housing crisis
Home price forecast

Here are the highlights of the NAR report: “Existing-home sales sagged for the eighth consecutive month to a seasonally adjusted annual rate of 4.71 million. Sales slipped 1.5% from August and 23.8% from the previous year. The median existing-home sales price increased to $384,800, up 8.4% from one year ago. The inventory of unsold existing homes declined for the second straight month to 1.25 million by the end of September, or the equivalent of 3.2 months’ supply at the current monthly sales pace.”

The takeaway is that yes, existing-home sales have been sluggish (eight consecutive months), however does that mean a housing crash? No. Consider the other important data points included in the news release: the median existing-home sale price increased 8.4 percent year-over-year, AND the inventory of unsold homes continues to decrease.

What’s your perception of a housing crisis ? For many, the memories are still fresh of the housing crisis of 2007 and subsequent foreclosure crisis. So, it’s not surprising that the media’s alarms go off when existing-home sales drop as they did recently. However, the fundamentals of today’s housing market are much different than that of 2008-2010. During the housing crisis of 2007, home sale prices plummeted when home sales dropped. Additionally, inventories of unsold homes swelled to record levels.

Today’s housing market is much different and looking at the entire picture, the stats tell a different story than what is being portrayed by the media. NAR Chief Economist Lawrence Yun chalks up the decline in sales to increasing mortgage interest rates, which are approaching the accepted historical average of 7 to 8 percent.  He also points out “…Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory… The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”

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.

Mortgage rates are on the move

This week’s Freddie Mac press release headline “Mortgage Rates Exceed Six Percent for the First Time Since 2008” grabbed everyone’s attention.  Indeed, mortgage rates are on the move and what does that mean for you and the housing market?

Mortgage rates are on the move
Get pre-approved before home shopping

According to Freddie Mac’s Chief Economist Sam Khater, “Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008. Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”

In her blog post, Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of Realtors, points out that the change in mortgage rates increased monthly payments about 60% compared to the same time last year. She also calls attention to the fact that the pace of rising rents is at a forty-year high! Regardless if you are renting or buying a home, housing affordability is declining.  Using a little math, she underscores how increasing rents outpace a fixed-rate mortgage on the purchase of a home.

Yes, mortgage rates are increasing. But a little history will put things in perspective. We all know that mortgage rates reached its peak in the early 1981 as a result of the deep recession of the late 1970’s.  Shortly afterward, average mortgage rates dropped of the next several decades (albeit the occasional peak). 

However, after the peak housing market of 2007, average mortgage rates dropped slightly in 2008 as a reaction to the market crashes and a decimated housing market. It wasn’t until five years later and average mortgage rates hovering in 3 percent range, that the housing market once again became broadly attractive to owner occupants (as opposed to investors). Mortgage rates have been averaging below 4 percent since then, with the exception of 2018 when rates rose above 4 percent.

Mortgage rates are on the move. Average mortgage rates are now above 6 percent, and there may be a silver lining.  Many are hoping that the rising interest rates will reduce home prices (although that remains to be seen).  However, after the brief rate shock is over, increased mortgage rates will likely incentivize banks to lend which could increase the pool of home buyers

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.

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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

Protected by Copyscape Web Plagiarism Detector

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.