Housing Market Updates | The HousingCoach

Real Estate Is Still Considered the Best Long-Term Investment

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

With all the headlines circulating about home prices and rising mortgage rates, you may wonder if it still makes sense to invest in homeownership right now. A recent poll from Gallup shows the answer is yes. In fact, real estate was voted the best long-term investment for the 11^th consecutive year, consistently beating other investment types like gold, stocks, and bonds (see graph below):

If you’re thinking about purchasing a home, let this poll reassure you. Even with everything happening today, Americans recognize owning a home is a powerful financial decision.

Why Do Americans Still Feel So Positive About the Value of Investing in a Home?

Purchasing real estate has typically been a solid long-term strategy for building wealth in America. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), notes:

“. . . homeownership is a catalyst for building wealth for people from all walks of life. A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.”

That’s because owning a home grows your net worth over time as your home appreciates in value and as you pay down your mortgage. And, since building that wealth takes time, it may make sense to start as soon as you can. If you wait to buy and keep renting, you’ll miss out on those monthly housing payments going toward your home equity.

Bottom Line

Buying a home is a powerful decision. So, it’s no wonder so many people view real estate as the best long-term investment. If you’re ready to start on your own journey toward homeownership, connect with a local real estate advisor today.

Oops! Home Prices Didn’t Crash After All

by The HousingCoach℠ - Matt McGrath | Jun 5, 2023

During the fourth quarter of last year, many housing experts predicted home prices were going to crash this year. Here are a few of those forecasts:

Jeremy Siegel, Russell E. Palmer Professor Emeritus of Finance at the Wharton School of Business:

“I expect housing prices fall 10% to 15%, and the housing prices are accelerating on the downside.”

Mark Zandi, Chief Economist at Moody’s Analytics:

“Buckle in. Assuming rates remain near their current 6.5% and the economy skirts recession, then national house prices will fall almost 10% peak-to-trough. Most of those declines will happen sooner rather than later. And house prices will fall 20% if there is a typical recession.”

Goldman Sachs:

“Housing is already cooling in the U.S., according to July data that was reported last week. As interest rates climb steadily higher, Goldman Sachs Research’s G-10 home price model suggests home prices will decline by around 5% to 10% from the peak in the U.S. . . . Economists at Goldman Sachs Research say there are risks that housing markets could decline more than their model suggests.”

The Bad News: It Rattled Consumer Confidence

These forecasts put doubt in the minds of many consumers about the strength of the residential real estate market. Evidence of this can be seen in the December Consumer Confidence Survey from Fannie Mae. It showed a larger percentage of Americans believed home prices would fall over the next 12 months than in any other December in the history of the survey (see graph below). That caused people to hesitate about their homebuying or selling plans as we entered the new year.

The Good News: Home Prices Never Crashed

However, home prices didn’t come crashing down and seem to be already rebounding from the minimal depreciation experienced over the last several months.

In a report just released, Goldman Sachs explained:

“The global housing market seems to be stabilizing faster than expected despite months of rising mortgage rates, according to Goldman Sachs Research. House prices are defying expectations and are rising in major economies such as the U.S.,. . . ”

Those claims from Goldman Sachs were verified by the release last week of two indexes on home prices: Case-Shiller and the FHFA. Here are the numbers each reported:

Home values seem to have turned the corner and are headed back up.

Bottom Line

The housing market is much stronger than many think. To get a true evaluation of your local market, reach out to a trusted real estate professional.

Today’s Real Estate Market: The ‘Unicorns’ Have Galloped Off

by The HousingCoach℠ - Matt McGrath | May 30, 2023

Comparing real estate metrics from one year to another can be challenging in a normal housing market. That’s due to possible variability in the market making the comparison less meaningful or accurate. Unpredictable events can have a significant impact on the circumstances and outcomes being compared.

Comparing this year’s numbers to the two ‘unicorn’ years we just experienced is almost worthless. By ‘unicorn,’ this is the less common definition of the word:

“Something that is greatly desired but difficult or impossible to find.”

The pandemic profoundly changed real estate over the last few years. The demand for a home of our own skyrocketed, and people needed a home office and big backyard.

Waves of first-time and second-home buyers entered the market.
Already low mortgage rates were driven to historic lows.
The forbearance plan all but eliminated foreclosures.
Home values reached appreciation levels never seen before.

It was a market that forever had been “greatly desired but difficult or impossible to find.” A ‘unicorn’ year.

Now, things are getting back to normal. The ‘unicorns’ have galloped off.

Comparing today’s market to those years makes no sense. Here are three examples:

Buyer Demand

If you look at the headlines, you’d think there aren’t any buyers out there. We still sell over 10,000 houses a day in the United States. Of course, buyer demand is down from the two ‘unicorn’ years. But, according to ShowingTime, if we compare it to normal years (2017-2019), we can see that buyer activity is still strong (see graph below):

Home Prices

We can’t compare today’s home price increases to the last couple of years. According to Freddie Mac, 2020 and 2021 each had historic appreciation numbers. Here’s a graph also showing the more normal years (2017-2019):

We can see that we’re returning to more normal home value increases. There were several months of minimal depreciation in the second half of 2022. However, according to Fannie Mae, the market has returned to more normal appreciation in the first quarter of this year.

Foreclosures

There have already been some startling headlines about the percentage increases in foreclosure filings. Of course, the percentages will be up. They are increases over historically low foreclosure rates. Here’s a graph with information from ATTOM, a property data provider:

There will be an increase over the numbers of the last three years now that the moratorium on foreclosures has ended. There are homeowners who lose their home to foreclosure every year, and it’s heartbreaking for those families. But, if we put the current numbers into perspective, we’ll realize that we’re actually going back to the normal filings from 2017-2019.

SBottom Line

There will be very unsettling headlines around the housing market this year. Most will come from inappropriate comparisons to the ‘unicorn’ years. A real estate professional is a great resource to help you keep everything in proper perspective.

The Benefits of Selling Now, According to Experts

by The HousingCoach℠ - Matt McGrath | May 25, 2023

If you’re trying to decide if now’s the time to sell your house, here’s what you should know. The limited number of homes available right now gives you a big advantage. That’s because there are more buyers out there than there are homes for sale. And, with so few homes on the market, buyers will have fewer options, so you set yourself up to get the most eyes possible on your house.

Here’s what industry experts are saying about why selling now has its benefits:

**Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):**

“Inventory levels are still at historic lows. Consequently, multiple offers are returning on a good number of properties.”

**Selma Hepp, Chief Economist at CoreLogic:**

“We have not seen the traditional uptick in new listings from existing homeowners, so undersupply of housing will continue to heighten market competition and put pressure on prices in most regions. Some markets are already heating up considerably, but price premiums that we saw last spring and summer are unlikely.”

**Clare Trapasso, Executive News Editor at Realtor.com:**

“Well-priced, move-in ready homes with curb appeal in desirable areas are still receiving multiple offers and selling for over the asking price in many parts of the country . . .”

**Jeff Tucker, Senior Economist at Zillow:**

“. . . sellers who price and market their home competitively shouldn’t have a problem finding a buyer.”

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If you’re thinking about selling your house, connect with a real estate advisor who can share the expert insights you need to make the best possible move today.

Powerful Job Market Fuels Homebuyer Demand

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

The spring housing market has been surprisingly active this year. Even with affordability challenges and a limited number of homes for sale, buyer demand is strong, and getting stronger.

One way we know there are interested buyers right now is because showing traffic is up. Data from the latest ShowingTime Showing Index, which is a measure of buyers actively touring homes, makes it clear more people are out looking at homes than there were prior to the pandemic (see graph below):

And though there’s less traffic than the buyer frenzy of the past couple of years, we’re not far off that pace. There are a lot of interested buyers checking out available homes right now.

But why are buyers so active at a time when mortgage rates are higher than they were just last year?

The Job Market Is Growing at a Stronger-Than-Expected Pace

With inflation still high, the Federal Reserve (the Fed) repeatedly hiking the Federal Funds Rate, and a lot of chatter in the media about a recession, it might surprise you just how strong today’s job market is. What might be even more surprising is the fact that it appears to be getting stronger (see graph below):

Each month, the Bureau of Labor Statistics (BLS) reports how many new jobs were added to the U.S. job market. The graph above shows 88,000 more jobs were created in April than in March. In fact, the April numbers beat expert projections. That’s a solid indicator the job market is growing.

Unemployment Is at a Near All-Time Low

Ever since the Fed began fighting inflation, many people expected the low unemployment rate we’ve seen over the past couple of years to rise – but that hasn’t happened.

In fact, what has happened is the unemployment rate has dropped to 3.4% – a 50-year low (see graph below):

With so many people steadily employed and financially stable right now, they’re still able to seriously consider buying a home.

What This Means for You

If you’re thinking about selling your house this year, a market with active buyers is music to your ears. That’s because there’ll be increased interest in your home when you put it on the market, especially at a time when the number of homes for sale is so low.

To get started, your best resource is an experienced real estate agent. They can help you price your house appropriately, navigate the offers you’ll receive, negotiate effectively, and minimize your stress and hassle.

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There are plenty of buyers out there right now trying to find a home that fits their needs. That’s because the job market is strong, and many people have the stable income needed to seriously consider homeownership. To put your house on the market and get in on the action, reach out to a trusted real estate agent.

What You Need To Know About Home Price News

by The HousingCoach℠ - Matt McGrath | May 17, 2023

The National Association of Realtors (NAR) will release its latest Existing Home Sales Report tomorrow. The information it contains on home prices may cause some confusion and could even generate some troubling headlines. This all stems from the fact that NAR will report the median sales price, while other home price indices report repeat sales prices. The vast majority of the repeat sales indices show prices are starting to appreciate again. But the median price reported on Thursday may tell a different story.

Here’s why using the median home price as a gauge of what’s happening with home values isn’t ideal right now. According to the Center for Real Studies at Wichita State University:

“The median sale price measures the ‘middle’ price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less. While this is a good measure of the typical sale price, it is not very useful for measuring home price appreciation because it is affected by the ‘composition’ of homes that have sold.

For example, if more lower-priced homes have sold recently, the median sale price would decline (because the “middle” home is now a lower-priced home), even if the value of each individual home is rising.”

People buy homes based on their monthly mortgage payment, not the price of the house. When mortgage rates go up, they have to buy a less expensive home to keep the monthly expense affordable. More ‘less-expensive’ houses are selling right now, and that’s causing the median price to decline. But that doesn’t mean any single house lost value.

Even NAR, an organization that reports on median prices, acknowledges there are limitations to what this type of data can show you. NAR explains:

“Changes in the composition of sales can distort median price data.”

For clarification, here’s a simple explanation of median value:

You have three coins in your pocket. Line them up in ascending value (lowest to highest).
If you have one nickel and two dimes, the median value of the coins (the middle one) in your pocket is ten cents.
If you have two nickels and one dime, the median value of the coins in your pocket is now five cents.
In both cases, a nickel is still worth five cents and a dime is still worth ten cents. The value of each coin didn’t change.

The same thing applies to today’s real estate market.

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Actual home values are going up in most markets. The median value reported tomorrow might tell a different story. For a more in-depth understanding of home price movements, reach out to a local real estate professional.