58% of Homeowners See a Drop in Home Values Coming...But are They Right?
According to the recently releasedModern Homebuyer SurveyfromValueInsured,58 percent of homeownersthink there will be a“housing bubble and price correction”within the next 2 years.
After what transpired just ten years ago, we can understand the concern Americans have about the current increase in home prices. However, this market has very little in common with what happened last decade.
The two major causes of the housing crash were:
A vast oversupply of housing inventory caused by home builders building at a pace that far exceeded historical norms.
Lending standards that were so relaxed that unqualified buyers could easily obtain financing thus enabling them to purchase a home.
Today, housing inventory is at a 20-year low with new construction starts well below historic norms and financing a home is anything but simple in the current mortgage environment. The elements that precipitated the housing crash a decade ago do not exist in today’s real estate market.
The current increase in home prices is the result of a standard economic equation:when demand is high and supply is low, prices rise.
If you are one of the 58% of homeowners who are concerned about home values depreciating over the next two years and are hesitant to move up to the home of your dreams, take comfort in the latestHome Price Expectation Survey.
Once a quarter, a nationwide panel of over one hundred economists, real estate experts and investment & market strategists are surveyed and asked to project home values over the next five years. The experts predicted that houses would continue to appreciate through the balance of this year and in 2018, 2019, 2020 and 2021. They do expectlower levelsof appreciationduring these years than we have experienced over the last five years but do not call for adecrease in values(depreciation) in any of the years mentioned.
If you currently own a home and are thinking of moving-up to the home your family dreams about, don’t let the fear of another housing bubble get in the way as this housing market in no way resembles the market of a decade ago.
Sellers: Your Home is an Oasis in an Inventory Desert
First-time homebuyers are flocking to the real estate market by the thousands to find their dream homes in order to make their dreams of homeownership a reality. Unfortunately for many, the inventory of starter and trade-up homes in the US has struggled to keep up with demand!
According to theNational Association of Realtors(NAR),the inventory of homes for saledropped 7.1% year-over-year to a 4.3-month supply and is down for the 25thconsecutive month.
Some homeowners may be hesitant to list their homes for sale because they are worried that they will also have a problem finding a home to buy and move in to. This is a legitimate concern; no one wants to sell their home quickly and not have anywhere to live.
But there is good news!If you are thinking of moving up to a luxury or premium home, there is more inventory available in these markets and you may even get a great deal on a home that has been on the market for a while.
If you are the owner of a starter home and you are looking to move into a trade-up home, or if you are just looking to relocate to a new area in a home of the same size, there is still hope!
In many markets, homeowners are building contingency plans into their contracts. This means that the homeowner builds in extra time before they close in order to find their dream home and they are upfront about the contingency with any buyers who come to see the house.
Your home is an oasis to buyers who are searching for homes in today’s market. The right buyers will sympathize and wait for you and your family to find your next home.
Don’t let the fear of not finding a home to move in to stop you from moving on with your life. Let’s get together to discuss ways to set expectations with potential buyers from the start.
Homes are Selling Quickly Nationwide
The National Association of Realtors(NAR) recently released their latest Existing Home Sales Report, which revealed that homes were on the market for an average of 28 days in June. This is a slight increase from the 27 days reported in May, but down from 34 days reported a year ago.
54% of homes across the country were on the market for less than a month in June!
Among the 27 states with homes selling in 30 days or less are Washington, Utah, California, and Colorado. The map below was created using results from NAR’s Monthly Realtors Confidence Index Survey.
Buyer demand is increasing as theinventory of homes available for sale remains low. If you are thinking about listing your home for sale this year, let’s meet up so I can help you take advantage of current market conditions!
Homeowner's Net Worth is Still Greater Than a Renter's
Every three years, theFederal Reserveconducts their Survey of Consumer Financesin which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports thata homeowner’s net worth is 36 times greater than that of a renter($194,500 vs. $5,400).
The latest survey data, covering 2014-2016 will be released later this year. In the meantime, Lawrence Yun, theNational Association of Realtors’ Chief Economistestimatesthat the gap has widened even further, to 45 times greater ($225,000 vs. $5,000)!
Put Your Housing Cost to Work for You
As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.
The latestNational Housing Pulse Survey from NAR reveals that 84% of consumers believe that purchasing a home is a good financial decision. William E. Browncomments:
“Despite the growing concern over affordable housing, this survey makes it clear that a strong majority still believe in homeownership and aspire to own a home of their own.Building equity,wanting a stable and safe environment, and having the freedom to choose their neighborhoodremain the top reasons to own a home.”
If you are interested in finding out if you could put your housing cost to work for you by purchasing a home, let’s get together and evaluate your ability to buy today!
What State Gives You the Most ‘Bang for Your Buck’? [INFOGRAPHIC]
Thinking of moving across the country? How far will your money take you?
The majority of states in the Midwest and South offer a lower cost of living compared to Northeast and Western states.
The ‘Biggest Bang for your Buck’ comes in Mississippi where, compared to the national average, you can actually purchase $116.01 worth of goods for $100.
For more information regarding the methodology used to create the map, visit theTax Foundation.
Hey, Millennial Homeowners!! It May be Time to Sell!
Contrary to what many believe, Millennials are not the ‘renter’ generation. Millennials purchased a larger percentage (34%) of homes in the U.S. than any other age group in 2017 and the most recentCensus Bureaureport shows that the homeownership rate among Millennials isfinally on the rise.
Many Millennials took advantage of post housing crash prices and theFirst-Time Homebuyers’ Tax Creditand jumped into homeownership in 2010. If you are one of these buyers, now may be the time to sell for many reasons. Here are a few:
1. Equity Build-Up
Home prices have been on the rise since the beginning of 2012 and your house may have appreciated by more than you think.ATTOM Data Solutions, intheirQ2 2017 U.S. Home Sales Reportrevealed that:
“…homeowners who sold in the second quarter realized an average price gain of $51,000 since purchase — the highest average price gain for home sellers since Q2 2007, when it was $57,000.
The average home seller price gain of $51,000 in Q2 2017 represented an average return of 26 percent on the previous purchase price of the home, the highest average home seller return since Q3 2007, when it was 27 percent.”
2. Projected Home Price Increases
If you just got married or just found out you are about to become a parent, you may have plans to move up a bigger home or perhaps move to a different area. Waiting to buy a more expensive home in this market probably doesn’t make sense. The experts contacted for theHome Price Expectation Surveyare projecting home prices to increase by nearly 5% over the next year. Yes, your house’s price will increase but not as much as a home currently valued higher than yours.
3. Projected Interest Rate Increases
The Mortgage Bankers’ Association,Freddie Mac, Fannie Maeand theNational Association of Realtorsare each projecting mortgage rates to increase over the next year.
If you are lucky enough to be one of those Millennials who purchased a house in 2010 (or even later), now might be the perfect time to move up to the home of your dreams!
Housing Inventory Hits 30-Year Low
Spring is traditionally the busiest season for real estate. Buyers, experiencing cabin fever all winter, emerge like flowers through the snow in search of their dream home. Homeowners, in preparation for the increased demand, are enticed to list their house for sale and move on to the home that will better fit their needs.
NewdatafromCoreLogicshows that even though buyers came out in force, as predicted, homeowners did not make the jump to list their home in the second quarter of this year. Frank Nothaft,Chief Economist for CoreLogichad this to say,
“The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory. As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent,which is the lowest Q2 reading in over 30 years.”
CoreLogic’s President & CEO,Frank Martell added,
“Home prices are marching ever higher,up almost 50 percent since the trough in March 2011.
While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”
Overall inventory across the United States is down for the 25thconsecutive month according to the latestreportfrom theNational Association of Realtorsand now stands at a 4.3-month supply.
Real estate is local.
Market conditions in the starter and trade-up home markets are in line with the median US figures, but conditions in the luxury and premium markets are following an opposite path. Premium homes are staying on the market longer with ample inventory to suggest a buyer’s market.
Buyers are out in force, and there has never been a better time to move-up to a premium or luxury home. If you are considering selling your starter or trade-up home and moving up this year, let’s get together to discuss the exact conditions in our area.
93.9% of Homes in The US Have Positive Equity
CoreLogic’s latest Equity Report revealed that ninety-one thousand residential properties regained equity in Q1 2017. The outlook for 2017 remains positive as well, as an additional 600 thousand properties will regain equity if home prices rise another 5% this year.
The study also revealed that:
Roughly 63% of all homeowners have seen their equity increase since Q1 2016
The average homeowner gained about $14,000 in equity between Q1 2016 and Q1 2017
Only 1.6% of residential properties are near-negative equity
Below is a map showing the percentage of homes with a mortgage, in each state, that have positive equity. (The states in gray have insufficient data to report.)
Significant Equity Is On The Rise
Frank Martell, President & CEOofCoreLogic, believes this is great news for the “long-term health of the U.S. economy.” He went on to say:
“Homeowner equity increased by $766 billion over the last year, the largest increase since Q2 2014. The rising cushion of home equity is one of the main drivers of improved mortgage performance. Since home equity is the largest source of homeowner wealth, the increase in home equity also supports consumer balance sheets, spending and the broader economy.”
Of the 93.9% of homeowners with positive equity in the US, 78.8% have significant equity (defined as more than 20%). This means that nearly three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home, now.
The map below shows the percentage of homes with a mortgage, in each state, that have significant equity.(The states in gray have insufficient data to report.)
If you are one of the many homeowners who are unsure of how much equity they have in their homes and are curious about their ability to move, let’s meet up to evaluate your situation.
How Long Do Most Families Stay in Their Home?
The National Association of Realtors(NAR) keeps historical data on many aspects of homeownership. One of the data points that has changed dramatically is the median tenure of a family in a home, meaning how long a family stays in a home prior to moving. As the graph below shows, for over twenty years (1985-2008), the median tenure averaged exactly six years. However,since 2008, that average is almost nine years – an increase of almost 50%.
Why the dramatic increase?
The reasons for this change are plentiful!
The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property). Also, the uncertainty of the economy made some homeowners much more fiscally conservative about making a move.
With home prices rising dramatically over the last several years, 93.9% of homes with a mortgage are now in a positive equity situation with 78.8% of them having at least 20% equity, accordingto CoreLogic.
With the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.
“Sellers 36 years and younger stayed in their home for six years…”
These homeowners who are either looking for more space to accommodate their growing families or for better school districts are more likely to move more often (compared to 10 years for typical sellers in 2016). The homeownership rate among young families, however, has still not caught up to previous generations, resulting in the jump we have seen in median tenure!
What does this mean for housing?
Many believe that a large portion of homeowners are not in a house that is best for their current family circumstance; They could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple living in a one-bedroom condo planning to start a family.
These homeowners are ready to make a move, and since a lack of housing inventory is still a major challenge in the current housing market, this could be great news.
20 Tips for Preparing your House For Sale [INFOGRAPHIC]
When listing your house for sale your top goal will be to get the home sold for the best price possible!
There are many small projects that you can do to ensure this happens!
Your real estate agent will have a list of specific suggestions for getting your house ready for market and is a great resource for finding local contractors who can help!