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As you follow the news, you’re likely seeing headlines discussing what’s going on in today’s housing market. Chances are high that some of the more recent storylines you’ve come across mention terms like cooling or slowing when talking about where the market is headed.
But what do these terms mean? The housing market today is anything but normal, and it’s still an incredibly strong sellers’ market, especially when compared to the few years leading up to the pandemic. With that in mind, what can previous years tell us about today’s real estate market and if it’s truly slowing?
You may see headlines about a drop in home sales. But are those headlines telling the full story? The most recent Existing Home Sales Report from the National Association of Realtors (NAR) does show a drop of about 2% from July to August. But the month-over-month decline doesn’t provide the full picture (see graph below):
As the graph shows, historical context is key. Today’s home sales are well ahead of some of the more normal years that led up to the health crisis. That means buyers are still in the market, which is great news if you’re planning to list your home.
When headlines mention the market is slowing, sellers may naturally wonder if their house will sell as quickly as they’d like. According to the most recent Realtors Confidence Index from NAR, homes are still selling at record speed (see graph below):
Again, if we look back at data from previous years, we can see the average time on market – 17 days – means homes are selling faster than a normal pace.
The Realtors Confidence Index from NAR also shows a drop in the average number of offers homes are receiving in August, and many headlines may simply focus there without providing the important context (see graph below):
Again, it’s important to compare today’s market to trends from recent years. Currently, the average number of offers per listing is higher than 39 of the previous 45 months. That means the likelihood of a bidding war on your home is still high. And the number of offers your house receives can have a major influence on the final sale price.
While there are slight declines in various month-to-month data, it’s important to keep historical context in mind when determining what’s happening in today’s market. Odeta Kushi, Deputy Chief Economist at First American, put it best recently, saying:
“It’s not the white-hot market from earlier in the year & it’s not the 2020 market benefiting from a wave of pent-up demand but make no mistake this is still a hot housing market.”
Don’t let headlines make you rethink listing your home this fall. Selling today means you can still take advantage of high buyer demand, multiple offers, and a quick sale. If you’re thinking of selling your house, let’s connect and discuss why this fall is the perfect time to do so.
The last 18 months changed what many buyers are looking for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3 2021. The survey reveals the following:
If you’re a homeowner who wants to add any of the above, you have two options: renovate your current house or buy a home that already has the spaces you desire. The decision you make could be determined by factors like:
In either case, you’ll need access to capital: the funds for the renovation or the down payment your next home would require. The great news is that the money you need probably already exists in your current home in the form of equity.
The record-setting increases in home prices over the last two years dramatically improved homeowners’ equity. The graph below uses data from CoreLogic to show the average home equity gain in the first quarter of the last nine years:
Odeta Kushi, Deputy Chief Economist at First American, quantifies the amount of equity homeowners gained recently:
“Remember U.S. households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and the remaining ~$24 trillion in equity. In inflation adjusted terms, homeowners in Q2 had an average of $280,000 in equity- a historic high.”
As a homeowner, the money you need to purchase the perfect home or renovate your current house may be right at your fingertips. However, waiting to make your decision may increase the cost of tapping that equity.
If you decide to renovate, you’ll need to refinance (or take out an equity loan) to access the equity. If you decide to move instead and use your equity as a down payment, you’ll still need to mortgage the remaining difference between the down payment and the cost of your next home.
Mortgage rates are forecast to increase over the next year. Waiting to leverage your equity will probably mean you’ll pay more to do so. According to the latest data from the Federal Housing Finance Agency (FHFA), almost 57% of current mortgage holders have a mortgage rate of 4% or below. If you’re one of those homeowners, you can keep your mortgage rate under 4% by doing it now. If you’re one of the 43% of homeowners with a mortgage rate over 4%, you may be able to do a cash-out refinance or buy a more expensive home without significantly increasing your monthly payment.
If you’re ready to either redesign your current house or find an existing or newly constructed home that has everything you want, the first thing you need to do is determine how much equity you have in your current home. To do that, you’ll need two things:
You can probably find the mortgage balance on your monthly mortgage statement. To find the current market value of your house, you can pay several hundreds of dollars for an appraisal, or you can contact a local real estate professional who will be able to present to you, at no charge, a professional equity assessment report.
If the past 18 months have refocused your thoughts on what you want from your house, now may be the time to either renovate or make a move to the perfect home.
Today’s housing market is truly one for the record books. Over the past year, we’ve seen the lowest mortgage rates in history. And while those rates seemed to bottom out in January of this year, the golden window of opportunity for buyers isn’t over just yet. If you’re one of the buyers who worry they’ve missed out, rest assured today’s mortgage rates are still worth taking advantage of.
Even today, our mortgage rates are below what they’ve been in recent decades. So, while you may not be able to lock in the rate your friend got recently, you’re still in a great position to secure a rate well below what your parents and even grandparents got in years past. The key will be acting sooner rather than later.
In late September, mortgage rates ticked above 3% for the first time in months. And according to experts throughout the industry, mortgage rates are projected to continue rising in the months ahead. Here’s where experts say rates are headed:
While a projected half percentage point increase may not seem substantial, it does have an impact when you’re buying a home. When rates rise even slightly, it affects how much you’ll pay month-to-month on your home loan. The chart below shows how it works:
In this example, if rates rise to 3.55%, you’ll pay an extra $100 each month on your monthly mortgage payment if you purchase a home around this time next year. That extra money can really add up over the life of a 15 or 30-year loan.
Clearly, today’s mortgage rates are worth taking advantage of before they climb further. The rates we’re seeing right now give you a unique opportunity to afford more home for your money while keeping your monthly payment down.
Waiting for a lower mortgage rate could cost you. Experts project rates will continue to rise in the months ahead. Let’s connect so you can seize this opportunity before they increase further.
A recent survey from LendingTree.com found there are multiple reasons why Americans would choose to purchase a home instead of renting. Some of the most popular non-financial reasons given include:
In the same survey, 41% of respondents say they’d rather own a home than rent because of the unique way homeownership builds wealth over time.
And experts agree – the home you own is an important tool for building your net worth. Here’s what many of those experts have to say about building long-term financial stability through homeownership.
According to the National Association of Realtors (NAR):
“Homeowners who purchased a typical single-family existing-home 30 years ago at the median sales price of $103,333 with a 10% down payment loan and who sold the property at the median sales price of $357,700 in 2021 Q2 accumulated housing wealth of $349,258, . . .”
Mark Fleming, Chief Economist at First American, points out that a home is truly a one-of-a-kind asset. It’s the only asset that’s both an investment and a place for you to call your own.
“The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation. . . . We won’t always have 17% house price appreciation, but we have to take into account the fact that the shelter that you’re owning is an equity-generating or wealth-generating asset.”
Homeowners can leverage the wealth they generate in several ways throughout their life. Tapping into accumulated equity has long been used to pay for the cost of an education, to start a business, or to fund various other expenses. The Joint Center of Housing Studies at Harvard points out:
“. . . by paying down mortgage principal each month and participating in the long-term appreciation of home values, a family can build wealth that can be used for retirement or other needs, including helping the next generation.”
With home prices expected to continue to appreciate in coming years, homebuyers have an opportunity to start the long-term wealth-building process right now. Let’s connect today if you’re ready to begin your journey on the path to becoming a homeowner.
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The financial benefits of buying a home versus renting one are always up for debate. However, one element of the equation is often ignored – the ability to build wealth as a homeowner.
According to the latest research from the National Association of Realtors (NAR):
“Homeownership is a key pathway to building wealth and narrowing the racial income and wealth inequality gap. Housing wealth (equity) accumulation takes time and is built up by price appreciation and paying off the mortgage.”
An increase in equity builds the wealth of the individual that owns it. This wealth can be passed down to future generations. The Federal Reserve in an addendum to their Survey of Consumer Finances explains:
“There are numerous ways families can transmit wealth and resources across generations. Families can directly transfer their wealth to the next generation in the form of a bequest. They can also provide the next generation with inter vivos transfers (gifts), for example, providing down payment support to enable a home purchase or a substantial wedding gift.”
The Federal Reserve also explains another way wealth (including the additional net worth generated by an increase in home equity) can benefit future generations:
“In addition to direct transfers or gifts, families can make investments in their children that indirectly increase their wealth. For example, families can invest in their children’s educational success by paying for college or private schools, which can in turn increase their children’s ability to accumulate wealth.”
Here’s a look at how equity can build your wealth over time when you own a home.
The NAR research reveals that the average gain for homeowners over the last five years was $139,134 and over the last 10 years was $218,505. Looking even further back in time, the article says:
“Homeowners who purchased a typical single-family existing-home 30 years ago at the median sales price of $103,333 with a 10% down payment loan and who sold the property at the median sales price of $357,700 in 2021 Q2 accumulated housing wealth of $349,258.”
Homeownership builds household wealth which also enables households to more easily move to the home of their dreams. As Mark Fleming, the Chief Economist at First American, explains:
“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity.”
If you missed out on the equity gains over the last 30 years, don’t fret. Experts are still calling for substantial growth in equity over the next five years.
The most recent Home Price Expectation Survey, a survey of over one hundred economists, real estate experts, and investment and market strategists, expects home values (and therefore equity) to increase as follows:
The survey estimates a 31.8% cumulative appreciation over the next five years. Using their annual projections, the graph below shows the equity build-up a purchaser could earn, using a $350,000 home as an example:
That’s a potential increase in household wealth of $111,285 over five years.
Owning a home is one of the best ways to grow your wealth over time. House wealth can impact generations. In many cases, the largest single investment a household has is their home. As that investment appreciates in value, the financial options also increase.
This month we look at the seasonal home sales patterns and prices.
Full Transcription:
It is October 21 and Balloon Fiesta is on. But I want to look at some real estate data. Yay! For the Albuquerque area.
You know, we just got our September data and I wanted to dig into it. But this time, this month, what I want to do. You know, I’ve been doing this for a while, but this month, I want to look at some history and kind of pull together what we’re seeing and where we’re where I kind of see things going. So let’s jump in to this and click the button. Here we go.
All right. If I want one thing that I think is interesting, you know, is this whole days on the market thing right now, we’re looking at average days on market is down to 12.
And by the way, this data, just so we know we’re looking at this data, represents the Albuquerque MSA, which is the three counties, and it’s all just single-family, either detached or attached properties, average days.
Our market is down to 12 median days on market. It’s been down here. It’s even lower. It was three back in May, June. But median meaning, you know, half of those homes are selling right now in four days or less for September. But let’s jump to really the big story, which is the months supply.
So month supply is a really, really great gauge to judge kind of where we are from supply versus demand, as we know. Supply has been very limited. We know demand has been very strong, which, of course, has driven home prices up substantially in the last couple of years.
If we look go back and look at this, though, I want to go back to right somewhere in here, right toward the end of 2012 is when home prices started to climb back again.
In fact, let me just show you that to put some perspective on this. If we look at price per square foot, home prices bottomed out somewhere, you know, after the Great Recession and the housing crisis. Home prices went down, down, down until about 2012, let’s say.
And since then, we’ve been on this very nice, gradual increase. And we’re looking at price per square foot here, which is a great indicator of price move. But of course, now what we’ve seen since the beginning of 2020. Home prices just have gone through the roof.
Really. I mean, it they have just really accelerated.
And we’ve seen let’s see.
So September this year versus September last year, we’ve seen almost a 19 percent increase in the price per square foot. There’s some data out there that suggest that home prices in the Albuquerque area have appreciated anywhere from 15 to probably right around this 20 percent.
And of course, it depends on neighborhood. It depends on the price range. A lower price of homes are definitely moving faster than the higher priced homes and it’s moving faster. But also home prices are moving faster and those lower prices pending sales have stayed very strong.
We had a very strong month again in September, up five percent versus September last year, which was right here, which was still very strong,
versus September in 2019.
And so September 2019.
And if you go back, you’ll see, you know, year over year, all the way back to 2011, we’ve had an increase in the number of homes going under contract, which mean turned into closed sales.
You’ll see a very strong seasonal trend here where the months of March,
April, May. March, April, May. March, April, May. March, April, May.
July in this case in 2019 are always the strongest month.
And and you’re you’re slower months are, you know, December, January,
generally, November, December, January.
So very, very consistent with that.
Of course, 2020 threw a wrench into a lot of things, including the home sales. So we definitely had a big pause in March, April and of last year. But of course, we came roaring back.
You know, we had our ginner, normal seasonal slow down last year, although you can see it was still stronger than years previous.
And then, of course, this year has been very strong. Little bit of I don’t know why June kind of pulled back, but we’ll see that July, August, September have been very strong.
So, you know, these national stories that you hear about the housing market slowing down. Well, that’s not happening here, at least not now.
Now we’re getting some seasonal slowdown. But, you know, you can look at this data and see it hasn’t slowed down that much. Let’s look at
the actual prices from an average price standpoint.
These are close average price. We did peak out in July of this year at three hundred and thirty seven thousand. Had a little bit of pullback here in the last few months. Not unusual. Again, if you look at these seasonal trends peaks out in June, July, peaks out June, June.
These were all June, so.
Yeah. I mean, what I wanted to really point out, this video is that we do have some seasonal trends. We do have some ebb and flow in the market. And I suspect going into this month, October and into November, we’ll see less homes in the market. Homes will start coming out of the market. I do suspect home prices will flatten a little bit. I don’t think people can continue to keep pushing that home price, another one – two percent each month. It doesn’t look like the market supports that, but that’s just the data, right.
You know, you have to look at each home individually. You have to look at what the competition is in the neighborhood when you are pricing a home.
So take that into account as well.
So a lot of data here. If you want more data, you can visit our website at Welcome Home. I have a whole bunch of charts and graphs and all kinds of good stuff there. If you want to check that out and if you have any questions about the real estate market, just reach out to me.
Send us a message through my website. Again, welcomehomeabq.com, Tego Venturi, Keller Williams Realty, and Venturi Realty Group.
If you want to dig into more Albuquerque Area housing data you can see more on our site.
> 3 Yr Trends. Monthly and Annually: https://welcomehomeabq.com/albuquerque-real-estate-trends-2/
> Long Term Trends: https://welcomehomeabq.com/albuquerque-real-estate-market-trends/
> Real-Time (Active Inventory) Trends: https://welcomehomeabq.com/albuquerque-msa-real-estate-market-conditions/
There’s a well-known economic theory – the law of supply and demand – that explains what’s happening with prices in the current real estate market. Put simply, when demand for an item is high, prices rise. When the supply of the item increases, prices fall. Of course, when demand is very high and supply is very low, prices can rise significantly.
Understanding the impact both supply and demand have can provide the answers to a few popular questions about today’s housing market:
According to the latest Home Price Insights report from CoreLogic, home prices have risen 18.1% since this time last year. But what’s driving the increase?
Recent buyer and seller activity data from the National Association of Realtors (NAR) helps answer that question. When we take NAR’s buyer activity data and compare it to the seller traffic during the same timeframe, we can see buyer demand continues to outpace seller activity by a wide margin. In other words, the demand for homes is significantly greater than the current supply that’s available to buy (see maps below):
This combination of low supply and high demand is what’s driving home prices up. Bill McBride, author of the Calculated Risk blog, puts it best, saying:
“By some measures, house prices seem high, but the recent price increases make sense from a supply and demand perspective.”
The supply of homes for sale will greatly affect where prices head over the coming months. Many experts forecast prices will continue to increase, but they’ll likely appreciate at a slower rate.
Buyers hoping to purchase the home of their dreams may see this as welcome news. In this case, perspective is important: a slight moderation of home prices does not mean prices will depreciate or fall. Price increases may occur at a slower pace, but experts still expect them to rise.
Five major entities that closely follow the real estate market forecast home prices will continue appreciating through 2022 (see graph below):
If you’re waiting to enter the market because you’re expecting prices to drop, you may end up paying more in the long run. Even if price increases occur at a slower rate next year, prices are still projected to rise. That means the home of your dreams will likely cost even more in 2022.
The truth is, high demand and low supply are what’s driving up home prices in today’s housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise. If you’re a potential homebuyer, let’s connect today to discuss what that could mean for you if you wait even longer to buy.
Every Thursday, Freddie Mac releases the results of their Primary Mortgage Market Survey which reveals the most recent movement in the 30-year fixed mortgage rate. Last week, the rate was announced as 3.01%. It was the first time in three months that the mortgage rate surpassed 3%. In a press release accompanying the survey, Sam Khater, Chief Economist at Freddie Mac, explains:
“Mortgage rates rose across all loan types this week as the 10-year U.S. Treasury yield reached its highest point since June.”
The reason Khater mentions the 10-year U.S. Treasury yield is because there has been a very strong relationship between the yield and the 30-year mortgage rate over the last five decades. Here’s a graph showing that relationship:
The relationship has also been consistent throughout 2021 as evidenced by this graph:
The graph also reveals the most recent jump in mortgage rates was preceded by a jump in the 10-year Treasury rate (called out by the red circles).
According to Investopedia:
“There are a number of economic factors that impact Treasury yields, such as interest rates, inflation, and economic growth.”
Since there are currently concerns about inflation and economic growth due to the pandemic, the Treasury yield spiked last week. That spike impacted mortgage rates.
Khater, in the Freddie Mac release mentioned above, says:
“We expect mortgage rates to continue to rise modestly which will likely have an impact on home prices, causing them to moderate slightly after increasing over the last year.”
Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of Realtors (NAR), also addresses the issue:
“Consumers shouldn’t panic. Keep in mind that even though rates will increase in the following months, these rates will still be historically low. The National Association of REALTORS forecasts the 30-year fixed mortgage rate to reach 3.5% by mid-2022.”
Forecasting mortgage rates is very difficult. As Mark Fleming, Chief Economist at First American, once quipped:
“You know, the fallacy of economic forecasting is don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”
That being said, if you’re either a first-time homebuyer or a current homeowner thinking of moving into a home that better fits your current needs, keep abreast of what’s happening with mortgage rates. It may very well impact your decision.