Housing Market Updates | The HousingCoach

Homebuyers Are Getting Used to the New Normal

by The HousingCoach℠ - Matt McGrath | Jul 18, 2023

Before you decide to sell your house, it’s important to know what you can expect in the current housing market. One positive trend right now is homebuyers are adapting to today’s mortgage rates and getting used to them as the new normal.

To better understand what’s been happening with mortgage rates lately, the graph below shows the trend for the 30-year fixed mortgage rate from Freddie Mac since last October. As you can see, rates have been between 6% and 7% pretty consistently for the past nine months:

According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), mortgage rates play a significant role in buyer demand and, by extension, home sales. Yun highlights the positive impact of stable rates:

“Mortgage rates heavily influence the direction of home sales. Relatively steady rates have led to several consecutive months of consistent home sales.”

As a seller, hearing that home sales are consistent right now is good news. It means buyers are out there and actively purchasing homes. Here’s a bit more context on how mortgage rates have impacted demand recently.

When mortgage rates surged dramatically last year, escalating from roughly 3% to 7%, many potential buyers felt a bit of sticker shock and decided to hold off on their plans to purchase a home. However, as time has passed, that initial shock has worn off. Buyers have grown more accustomed to current mortgage rates and have accepted that the record-low rates of the last few years are behind us. As Doug Duncan, SVP and Chief Economist at Fannie Mae, says:

“. . . consumers are adapting to the idea that higher mortgage rates will likely stick around for the foreseeable future.”

In fact, a recent survey by Freddie Mac reveals 18% of respondents say they’re likely to buy a home in the next six months. That means nearly one out of every five people surveyed plan to buy in the near future. And that goes to show buyers are planning to be active in the months ahead.

Of course, mortgage rates aren’t the sole factor affecting buyer demand. No matter where mortgage rates stand, people will always have reasons to move, whether it’s for job relocation, changing households, or any other personal motivation. As a seller, you can feel confident there is a market for your house today. And that demand is pretty strong as buyers settle into where rates are right now.

Bottom Line

The way buyers perceive today’s mortgage rates is shifting – they’re getting used to the new normal. Steady rates are contributing to strong buyer demand and consistent home sales. Connect with a local real estate agent to get your house on the market and in front of those buyers.

Low Housing Inventory Is a Sweet Spot for Sellers [INFOGRAPHIC]

by The HousingCoach℠ - Matt McGrath | Jul 14, 2023

Some Highlights

Today’s housing inventory is still well below more normal years.
This low inventory is why homes that are priced right are still selling quickly and seeing multiple offers.
If you want to sell your house, now is a great time because inventory is still low. Contact a trusted real estate agent to start the process.

Momentum Is Building for New Home Construction

by The HousingCoach℠ - Matt McGrath | Jul 11, 2023

If you’re in the process of looking for a home today, you know the supply of homes for sale is low because you’re feeling the impact of having a limited pool of options. And, if your biggest hurdle right now is that you’re having trouble finding something you like, don’t forget that a newly built home is a great option.

As a recent article from the National Association of Realtors (NAR) says:

“Home buyers continue to be met with limited housing options during what’s typically the real estate market’s busiest season. . . . The current supply of existing homes is about half the level it was in 2019 . . . Meanwhile, the market for new construction is a bright spot.”

Here’s a look at a key metric that shows just how much new home construction is ramping up nationwide. It’s called new residential completions. Basically, completions are newly built homes that are finished and ready to move into.

The graph below uses data from the Census to show the trend of new-home completions over time, including the long-term average for the number of finished housing units (shown in black on the graph):

As you can see on the left (shown in orange), leading up to the housing crash, builders exceeded that average. The result was an oversupply of homes on the market, so home values declined. That was one of the factors that led to the housing crash back in 2008.

Since then, the level of new home construction has fallen off, and builders haven’t built enough homes to meet the historical average (shown in red). That underbuilding left the housing market with a multi-year inventory deficit. And, that deficit is part of what makes inventory so low right now.

But, here’s the good news. The green on the right shows that according to the latest report from the Census, builders are matching the long-term average right now. And that means they’re bringing more newly built homes to the market than they have in recent memory.

And residential starts and permits are also gaining momentum. Starts are homes where the construction has officially kicked off. Permits are homes where builders are planning to break ground soon. Since both are up, it’s a sign there are even more newly built homes coming soon.

What This Means for You

More newly built homes in various stages of the construction process means your pool of options just got bigger. If you’re looking to move right now and timing is important to you, reach out to a local real estate professional to explore the homes that were recently completed in your area. If construction is done on those homes, you should be able to move in quickly.

But, if you can wait a bit and the idea of customizing a home from the ground up appeals to you, ask that same agent about the homes in your area that are in the process of being built. If you buy a home that’s still in the works, you can help pick the features and finishings along the way. And when none of the homes you’ve looked at so far are to your liking, being able to tailor one to your taste may be your best option.

Either way, a trusted real estate agent is a crucial part of the process. They’ll know exactly what’s available in your area and can base their recommendations on your unique needs, desired neighborhoods, and more.

Bottom Line

So, if you’re having trouble finding a home you like while inventory is so low, it may be time to consider looking into new-home construction. If you’d like to start that conversation, reach out to a trusted local real estate professional who’s an expert on what’s available in your area.

Today’s Housing Inventory Is a Sweet Spot for Sellers

by The HousingCoach℠ - Matt McGrath | Jul 6, 2023

One of the biggest challenges in the housing market right now is how few homes there are for sale compared to the number of people who want to buy them. To help emphasize just how limited housing inventory still is, let’s take a look at the latest information on active listings, or homes for sale in a given month, as it compares to more normal levels.

According to a recent report from Realtor.com:

“On average, active inventory in June was 50.6% below pre-pandemic 2017–2019 levels.”

The graph below helps illustrate this point. It uses historical data to provide a more concrete look at how much the numbers are still lagging behind the level of inventory typical of a more normal market (see graph below):

It’s worth noting that 2020-2022 are not included in this graph. That’s because they were truly abnormal years for the housing market. To make the comparison fair, those have been omitted so they don’t distort the data.

When you compare the orange bars for 2023 with the last normal years for the housing market (2017-2019), you can see the count of active listings is still far below the norm.

What Does This Mean for You?

If you’re thinking about selling your house, that low inventory is why this is a great time to do so. Buyers have fewer choices now than they did in more normal years, and that’s continuing to impact some key statistics in the housing market. For example, sellers will be happy to see the following data from the latest Confidence Index from the National Association of Realtors (NAR):

The percent of homes that sold in less than a month ticked up slightly to 74%.
The median days on market went down to 18 days, showing homes are still selling fast when priced right.
The average number of offers on recently sold homes went up to 3.3 offers.

Bottom Line

When supply is so low, your house is going to be in the spotlight. That’s why sellers are seeing their homes sell a little faster and get more offers right now. If you’ve thought about selling, now’s the time to make a move. Connect with a trusted real estate professional to get the process started.

Americans Still View Homeownership as the American Dream

by The HousingCoach℠ - Matt McGrath | Jul 4, 2023

Everyone’s interpretation of the American Dream is unique and personal. But, for many people, it’s tied to a sense of success, freedom, and prosperity. These are all things that owning a home can help provide.

A recent survey from Bankrate asked respondents which achievements they feel most embody the American Dream. The responses prove owning a home is still important to so many Americans today (see graph below):

As the graph shows, homeownership ranks above other significant milestones, including retirement, having a successful career, and earning a college degree.

A recent report from MYND helps shed light on why so many people value homeownership. It finds:

“. . . nearly two-thirds of Americans (65%) see homeownership as a means of building intergenerational wealth.”

That’s because, when you own a home, your equity (and net worth) grows over time as you pay down your home loan and as home prices appreciate. This can be a key factor in building intergenerational wealth and long-term financial stability.

To further drive home the difference homeownership can make in your life, a report from Fannie Mae says:

“Most consumers (87%) believe owning a home is important to ‘live the good life.’ . . . Notably, significantly more see ‘having less stress’ as a benefit achieved by owning than renting.”

Especially today, this could be because, when you own a home with a fixed-rate mortgage, you stabilize what’s likely your largest monthly expense (your housing cost), and that helps combat the impact of rising costs from inflation.

What Does This Mean for You?

While it may feel challenging to buy a home today with higher mortgage rates and home prices, if the time is right for you, know that when you buy a home, incredible benefits are waiting for you at the end of your journey.

Bottom Line

Buying a home is a significant and powerful choice, embodying the foundation of the American Dream. If you plan to make your homeownership dream a reality this year, take the first step by reaching out to a local real estate expert and start the process today.

Lending Standards Are Not Like They Were Leading Up to the Crash

by The HousingCoach℠ - Matt McGrath | Jun 28, 2023

You might be worried we’re heading for a housing crash, but there are many reasons why this housing market isn’t like the one we saw in 2008. One of which is how lending standards are different today. Here’s a look at the data to help prove it.

Every month, the Mortgage Bankers Association (MBA) releases the Mortgage Credit Availability Index (MCAI). According to their website:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is . . . a summary measure which indicates the availability of mortgage credit at a point in time.”

Basically, the index determines how easy it is to get a mortgage. Take a look at the graph below of the MCAI since they started keeping track of this data in 2004. It shows how lending standards have changed over time. It works like this:

When lending standards are less strict, it’s easier to get a mortgage, and the index (the green line in the graph) is higher.
When lending standards are stricter, it’s harder to get a mortgage, and the line representing the index is lower.

In 2004, the index was around 400. But, by 2006, it had gone up to over 850. Today, the story is quite different. Since the crash, the index went down because lending standards got tighter, so today it’s harder to get a mortgage.

Loose Lending Standards Contributed to the Housing Bubble

One of the main factors that contributed to the housing bubble was that lending standards were a lot less strict back then. Realtor.com explains it like this:

“In the early 2000s, it wasn’t exactly hard to snag a home mortgage. . . . plenty of mortgages were doled out to people who lied about their incomes and employment, and couldn’t actually afford homeownership.”

The tall peak in the graph above indicates that leading up to the housing crisis, it was much easier to get credit, and the requirements for getting a loan were far from strict. Back then, credit was widely available, and the threshold for qualifying for a loan was low.

Lenders were approving loans without always going through a verification process to confirm if the borrower would likely be able to repay the loan. That means creditors were lending to more borrowers who had a higher risk of defaulting on their loans.

Today’s Loans Are Much Tougher To Get than Before

As mentioned, lending standards have changed a lot since then. Bankrate describes the difference:

“Today, lenders impose tough standards on borrowers – and those who are getting a mortgage overwhelmingly have excellent credit.”

If you look back at the graph, you’ll notice after the peak around the time of the housing crash, the line representing the index went down dramatically and has stayed low since. In fact, the line is far below where standards were even in 2004 – and it’s getting lower. Joel Kan, VP and Deputy Chief Economist at MBA, provides the most recent update from May:

“Mortgage credit availability decreased for the third consecutive month . . . With the decline in availability, the MCAI is now at its lowest level since January 2013.”

The decreasing index suggests standards are getting much tougher – which makes it clear we’re far away from the extreme lending practices that contributed to the crash.

Bottom Line

Leading up to the housing crash, lending standards were much more relaxed with little evaluation done to measure a borrower’s potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. This goes to show, these are two very different housing markets, and this market isn’t like the last time.