Category Archives: Housing Market Updates

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Why This Is Not Like 2008 Again

Why This Is Not Like 2008 Again | Simplifying The Market

During the Great Recession, just over a decade ago, the financial systems the world depended on started to collapse. It created a panic that drove some large companies out of business (ex. Lehman Brothers) and many more into bankruptcy.

The financial crisis that accompanied the current pandemic caused hardship to certain industries and hurt many small businesses. However, it hasn’t rattled the world economy. It seems that a year later, things are slowly getting back to normal for many companies.

Why is there a drastic difference between 2008 and now?

In a post from RealtyTrac, they explain:

“We changed the rules. We told banks they needed more reserves and that they could no longer underwrite toxic mortgages. It turns out that regulation — properly done — can help us navigate financial minefields.”

Here are the results of that regulation, captured in a graph depicting the number of failed banks since 2007.Why This Is Not Like 2008 Again | Simplifying The Market

What was different this time?

The post mentioned above explains:

“In 2008 the government saw the foreclosure meltdown as a top-down problem and set aside $700 billion for banks under the Troubled Asset Relief Program (TARP). Not all of the $700 billion was used, but the important point is that the government did not act with equal fervor to help flailing homeowners, millions of whom lost their homes to foreclosures and short sales.

This time around the government forcefully moved to help ordinary citizens. Working from the bottom-up, an estimated $5.3 trillion went to the public in 2020 through such mechanisms as the Paycheck Protection Program (PPP), expanded unemployment benefits, tax incentives, and help for local governments. So far this year we have the $1.9 billion American Rescue Plan with millions of $1,400 checks as well as proposals to spend trillions more on infrastructure…Bank deposits increased by nearly $2 trillion during the past year and credit card debt fell.”

Bottom Line

Many have suffered over the past year. However, the economic toll of the current recession was nowhere near the scope of the Great Recession, and it won’t result in a housing crisis.

Content previously posted on Keeping Current Matters

Home Price Appreciation Is as Simple as Supply and Demand

Home Price Appreciation Is as Simple as Supply and Demand | Simplifying The Market

Home price appreciation continues to accelerate. Today, prices are driven by the simple concept of supply and demand. Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.

Let’s use three maps to show how this theory continues to affect the residential real estate market.

Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:Home Price Appreciation Is as Simple as Supply and Demand | Simplifying The MarketAs the map shows, certain states (colored in red) have appreciated well above the national average of 12.6%.

Map #2 – The change in state-by-state inventory levels year-over-year reported by realtor.com:Home Price Appreciation Is as Simple as Supply and Demand | Simplifying The MarketComparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Idaho, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one of causation.

The reason prices continue to accelerate is that housing inventory is still at all-time lows while demand remains high. However, this may be changing.

Is there relief around the corner?

The report by realtor.com also shows the monthly change in inventory for each state.

Map #3 – State-by-state changes in inventory levels month-over-month reported by realtor.com:Home Price Appreciation Is as Simple as Supply and Demand | Simplifying The MarketAs the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month. This may be evidence that homeowners who have been afraid to let buyers in their homes during the pandemic are now putting their houses on the market.

We’ll know for certain as we move through the rest of the year.

Bottom Line

Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels.

Content previously posted on Keeping Current Matters

Buying a Home Is Still Affordable

Buying a Home Is Still Affordable | Simplifying The Market

The last year has put emphasis on the importance of one’s home. As a result, some renters are making the jump into homeownership while some homeowners are re-evaluating their current house and considering a move to one that better fits their current lifestyle. Understanding how housing affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down the optimal window of time in which to make a purchase.

There are three main factors that go into determining how affordable homes are for buyers:

  1. Mortgage Rates
  2. Mortgage Payments as a Percentage of Income
  3. Home Prices

The National Association of Realtors (NAR) produces a Housing Affordability Index. It takes these three factors into account and determines an overall affordability score for housing. According to NAR, the index:

“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Their methodology states:

“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:Buying a Home Is Still Affordable | Simplifying The MarketThe blue bar represents today’s affordability. We can see that homes are more affordable now than they’ve been at any point since the housing crash when distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market for almost one hundred years.

Why are homes so affordable today?

Although there are three factors that drive the overall equation, the one that’s playing the largest part in today’s homebuying affordability is historically low mortgage rates. Based on this primary factor, we can see that it’s more affordable to buy a home today than at any time in the last eight years.

If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

If you feel ready to buy, purchasing a home this summer may save you a significant amount of money over time based on historical affordability trends. Let’s connect today to determine if now is the right time for you to make your move.

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Where Do Experts Say the Housing Market Is Heading?

Where Do Experts Say the Housing Market Is Heading? | Simplifying The Market

As we enter the middle of 2021, many are wondering if we’ll see big changes in the housing market during the second half of this year. Here’s a look at what some experts have to say about key factors that will drive the industry and the economy forward in the months to come.

realtor.com

“. . . homes continue to sell quickly in what’s normally the fastest-moving time of the year. This is in contrast with 2020 when homes sold slower in the spring and fastest in September and October. While we expect fall to be competitive, this year’s seasonal pattern is likely to be more normal, with homes selling fastest from roughly now until mid-summer.”

National Association of Realtors (NAR)

Sellers who have been hesitant to list homes as part of their personal health safety precautions may be more encouraged to list and show their homes with a population mostly vaccinated by the mid-year.”

Danielle Hale, Chief Economist at realtor.com

“Surveys showed that seller confidence continued to rise in April. Extra confidence plus our recent survey finding that more homeowners than normal are planning to list their homes for sale in the next 12 months suggest that while we may not see an end to the sellers’ market, we might see the intensity of the competition diminish as buyers have more options to choose from.”

Freddie Mac

We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”

Bottom Line

Experts are optimistic about the second half of the year. Let’s connect today to talk more about the conditions in our local market.

Content previously posted on Keeping Current Matters

Americans Choose Real Estate as the Best Investment [INFOGRAPHIC]

Americans Choose Real Estate as the Best Investment [INFOGRAPHIC] | Simplifying The Market

Americans Choose Real Estate as the Best Investment [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • For the eighth year in a row, real estate maintained its position as the preferred long-term investment among Americans.
  • Real estate has been gaining ground against stocks, gold, and savings accounts over the last 11 years and now stands at its highest rating in survey history.
  • Let’s connect if you’re ready to make real estate your best investment this year.

Content previously posted on Keeping Current Matters

Sellers Are Ready To Enter the Housing Market

Sellers Are Ready To Enter the Housing Market | Simplifying The Market

One of the biggest questions in real estate today is, “When will sellers return to the housing market?” An ongoing shortage of home supply has created a hyper-competitive environment for hopeful buyers, leading to the ultimate sellers’ market. However, as the economy continues to improve and more people get vaccinated, more sellers may finally be in sight.

The Home Purchase Sentiment Index (HPSI) by Fannie Mae recently noted the percentage of consumer respondents who say it’s a good time to sell a home increased from 61% to 67%. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, indicates:

Consumer positivity regarding home-selling conditions nearly matched its all-time high.” (See graph below):

Sellers Are Ready To Enter the Housing Market | Simplifying The MarketFannie Mae isn’t the only expert group noticing a rise in the percentage of people thinking about selling. George Ratiu, Senior Economist at realtor.com, shares:

“The results of a realtor.com survey . . . showed that one-in-ten homeowners plans to sell this year, with 63 percent of those, looking to list in the next 6 months. Just as encouragingly, close to two-thirds of sellers plan to sell their homes at prices under $350,000, which would offer a tremendous boost to affordable housing for first-time buyers.”

Bottom Line

If you’re considering selling your house, don’t wait for more competition to pop up in your neighborhood. Let’s connect today to explore the benefits of selling your house now before more homes come to the market.

Content previously posted on Keeping Current Matters

Americans See Real Estate as a Better Investment Than Stocks or Gold

Americans See Real Estate as a Better Investment Than Stocks or Gold | Simplifying The Market

Last month, in a post on the Liberty Street Economics blog, the Federal Reserve Bank of New York noted that Americans believe buying a home is definitely or probably a better investment than buying stocks. Last week, a Gallup Poll reaffirmed those findings.

In an article on the current real estate market, Gallup reports:

“Gallup usually finds that Americans regard real estate as the best long-term investment among several options — seeing it as superior to stocks, gold, savings accounts and bonds. This year, 41% choose real estate as the best investment, up from 35% a year ago, with stocks a distant second.”

Here’s the breakdown:Americans See Real Estate as a Better Investment Than Stocks or Gold | Simplifying The MarketThe article goes on to say:

“The 41% choosing real estate is the highest selecting any of the five investment options in the 11 years Gallup has asked this question.”

Is real estate really a secure investment right now?

Some question American confidence in real estate as a good long-term investment right now. They fear that the build-up in home values may be mirroring what happened right before the housing crash a little more than a decade ago. However, according to Merrill Lynch, J.P. Morgan, Morgan Stanley, and Goldman Sachs, the current real estate market is strong and sustainable.

As Morgan Stanley explains to their clients in a recent Thoughts on the Market podcast:

“Unlike 15 years ago, the euphoria in today’s home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation . . . . This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course.”

Bottom Line

America’s belief in the long-term investment value of homeownership has been, is, and will always be, very strong.

Content previously posted on Keeping Current Matters

Your House Could Be the Oasis in an Inventory Desert

Your House Could Be the Oasis in an Inventory Desert | Simplifying The Market

Homebuyers are flooding the housing market right now to take advantage of record-low mortgage rates. Many have a sense of urgency to find a home soon since experts forecast a steady rise in both rates and home prices this year and next. As a result, buyer demand greatly outweighs the current housing supply. Here’s how the shortage of houses for sale sets yours up to be the oasis in an inventory desert.

According to the National Association of Realtors (NAR), today’s housing inventory sits at an incredibly low 2.1-month supply, far below the 6-month mark for a neutral market. Inventory of single-family homes a year ago was already very low, and as you can see in the graph below, this year’s levels are even lower:Your House Could Be the Oasis in an Inventory Desert | Simplifying The MarketDue to these market conditions, today’s buyers frequently enter fierce bidding wars while trying to purchase a home. This in turn drives up home prices and gives sellers incredible leverage in the negotiation process, two big wins if you’re going to sell your house this year.

Bottom Line

In such a hot market, it can feel as though the supply of homes has virtually dried up, leaving buyers to wander in an inventory desert. That’s why there’s never been a better time to sell. To a parched buyer needing to secure a home as soon as possible, your house could be a true oasis.

Content previously posted on Keeping Current Matters

It’s Not Too Late To Apply For Forbearance

It’s Not Too Late To Apply For Forbearance | Simplifying The Market

Over the past year, the pandemic made it challenging for some homeowners to make their mortgage payments. Thankfully, the government initiated a forbearance program to provide much-needed support. Unless they’re extended once again, some of these plans and the corresponding mortgage payment deferral options will expire soon. That said, there’s still time to request assistance. If your loan is backed by HUD/FHA, USDA, or VA, you can apply for initial forbearance by June 30, 2021.

Recently, the Consumer Finance Institute of the Federal Reserve Bank of Philadelphia surveyed a national sample of 1,172 homeowners with mortgages. They discussed their familiarity with and understanding of lender accommodations that might be available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The results indicate that some borrowers didn’t take advantage of the support available through forbearance:

Most borrowers who had not used forbearance during the pandemic reported that it was because they simply did not need it. However, among the remainder, a lack of understanding about available accommodations may also be playing a role. Around 2 out of 3 in this group reported not seeking forbearance because they were unsure or pessimistic about whether they would qualify — even though a high fraction of borrowers are eligible for forbearance under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.”

Here are some of the reasons why those borrowers didn’t opt for forbearance:

  • They were concerned forbearance may be costly
  • They didn’t understand how to request forbearance
  • They didn’t understand how the plans worked and/or whether they would qualify

If you have similar questions or concerns, the following answers may ease your fears.

If you’re concerned forbearance may be costly:

The Consumer Financial Protection Bureau (CFPB) explains:

For most loans, there will be no additional fees, penalties, or additional interest (beyond scheduled amounts) added to your account, and you do not need to submit additional documentation to qualify. You can simply tell your servicer that you have a pandemic-related financial hardship.”

It’s important to contact your mortgage provider (the company you send your mortgage payment to every month) to explain your current situation and determine the best plan available for your needs.

If you’re not sure how to request forbearance:

Here are 5 steps to follow when requesting mortgage forbearance:

  1. Find the contact information for your servicer
  2. Call your servicer
  3. Ask if you’re eligible for protection under the CARES Act
  4. Ask what happens when your forbearance period ends
  5. Ask your servicer to provide the agreement in writing

If you don’t understand how the plans work and/or whether you will qualify:

This is how the Consumer Financial Protection Bureau (CFPB) explains the program:

Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances

Forbearance doesn’t mean your payments are forgiven or erased. You are still obligated to repay any missed payments, which, in most cases, may be repaid over time or when you refinance or sell your home. Before the end of the forbearance, your servicer will contact you about how to repay the missed payments.”

The CFPB also addresses who qualifies for forbearance relief:

You may have a right to a COVID hardship forbearance if:

  • You experience financial hardship directly or indirectly due to the coronavirus pandemic.
  • You have a federally backed mortgage, which includes HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans.

For mortgages that are not federally backed, servicers may offer similar forbearance options. If you are struggling to make your mortgage payments, servicers are generally required to discuss payment relief options with you, whether or not your loan is federally backed.”

Bottom Line

Like many Americans, your home may be your biggest asset. By acting quickly, you might be able to take advantage of critical relief options to help keep you in your home. Even if you tried to apply at the beginning of the pandemic and it for some reason didn’t work out, try again. Contact your mortgage provider today to determine if you qualify. If you have additional concerns, let’s connect to answer your questions and determine if there are other mortgage relief options in our area as well.

Content previously posted on Keeping Current Matters

Experts Say Home Prices Will Continue to Appreciate

Experts Say Home Prices Will Continue to Appreciate | Simplifying The Market

It’s clear that consumers are concerned about how quickly home values are rising. Many people fear the speed of appreciation may lead to a crash in prices later this year. In fact, Google reports that the search for “When is the housing market going to crash?” has actually spiked 2450% over the past month.

In addition, Jim Dalrymple II of Inman News notes:

“One of the most noteworthy things that came up in Inman’s conversations with agents was that every single one said they’ve had conversations with clients about whether or not the market is heading into a bubble.”

To alleviate some of these concerns, let’s look at what several financial analysts are saying about the current residential real estate market. Within the last thirty days, four of the major financial services giants came to the same conclusion: the housing market is strong, and price appreciation will continue. Here are their statements on the issue:

Goldman Sachs’ Research Note on Housing:

“Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. … consumer surveys indicate that household buying intentions are now the highest in 20 years. … As a result, the model projects double-digit price gains both this year and next.”

Joe Seydl, Senior Markets Economist, J.P.Morgan:

“Homebuyers—interest rates are still historically low, though they are inching up. Housing prices have spiked during the last six-to-nine months, but we don’t expect them to fall soon, and we believe they are more likely to keep rising. If you are looking to purchase a new home, conditions now may be better than 12 months hence.”

Morgan Stanley, Thoughts on the Market Podcast:

“Unlike 15 years ago, the euphoria in today’s home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation . . . . This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course.”

Merrill Lynch’s Capital Market Outlook:

“There are reasons to believe that this is likely to be an unusually long and strong housing expansion. Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle. Coronavirus-related preference changes have also sharply boosted home buying demand. At the same time, supply is unusually tight, with available homes for sale at record-low levels. Double-digit price gains are rationing the supply.”

Bottom Line

If you’re concerned about making the decision to buy or sell right now, let’s connect to discuss what’s happening in our local market.

Content previously posted on Keeping Current Matters