Mortgage rates increased slightly this summer, yet the price of homes seemed to continue rising in response to the high demand for homes. However, according to an article published by Yahoo! Finance, the housing boom may be winding down. Sales of new home fell 6.6% from May to June and the median home price only rose 6%, a stark drop from May’s gains reportedly in the 15-20% range.
In the article, reporter Georgia Tzanetos offers some possible reasons for the dip in demand and possible outcomes. The article indicates “Chief Investment Officer at the Bleakley Advisory Group Peter Boockvar told CNBC that ‘the moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays.’”
The next several months will reveal the cause behind the slowing of demand and price increases. If buyers are hesitant to purchase a home right now, it may be due to the “sticker shock” of rising home prices. These buyers may begin to search for homes again and even make a purchase if they see home prices decrease in the next few months. However, the lag in demand may be caused because, simply, “everyone who needed a home bought one…”, which would likely result in prices to continue to fall. As the remainder of the summer market plays out, real estate professionals will be watching closely anticipating what’s next for the real estate market.
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The last several months, real estate in the United States has been red hot. Low supply of homes, mortgage rates that continue to remain low and a large number of Americans making post-pandemic decisions to move to bigger homes or homes in different geographic areas have all held pave the way for a hot sellers’ market. However, many know that this is not the first time the real estate market exploded into situations of multiple offers, above asking price, with real estate professionals just trying to keep up. So, it should be no surprise to many seasoned real estate professionals, that there will be a change in the market at some point.
In an article published by Forbes, a theory about the real estate market phases is detailed. Real Estate expert Glenn R. Mueller, PhD believes the four phases of the real estate market are Recovery, Expansion, Hyper Supply and Recession. And, according to Sam Mehrbod PhD, author of the Forbes article, U.S. real estate markets are currently in phase two. This phase is still a sellers’ market, but heading toward the peak. On the horizon, potentially, is the third phase. This phase is a buyers’ market defined as Hyper Supply and buyers become a little more scarce and panic selling can begin.
Mehrbod has suggestions for real estate professionals to help them prepare for the next phase, building a net work to ensure success in any phase of the real estate market. Its imperative for real estate professionals to continue to build and stay relevant within their networks. He makes suggestions such as regularly posting relevant and educational content on social media, beginning to build buyer lead lists for future markets, and utilizing marketing funds consistently to allow long term marketing plans. By staying on top of networking and marketing and anticipating what might be coming up next, real estate professionals can be prepared to ride the next wave.
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The COVID-19 pandemic had a significant impact on the real estate market. As many employees were required to work from home and more Americans found themselves at home many more hours of the day, they decided it was time to make a move. Perhaps to a house with more space for a home office and more space for the all the family members spending more time at home to spread out. As a result, demand increased yet supply could not keep up. Naturally, in turn, home prices increased as well.
As Americans feel a slight return to life before the pandemic, the question is, do they still feel that it is a good time to buy a home. Are Americans leery about the market taking a downturn and perhaps adjust itself? An article published by Realtor.com indicates that Americans remain optimistic about the upward trend of home prices. “Gallup’s survey found that 71% of Americans believe that home prices are going to increase over the next year in their local market” writes reporter Jacob Passy.
Further, more than half of Americans surveyed by this Gallup poll indicate that now is still a good time to buy a home, 53% to be exact. Only 50% of Americans felt this way last year at this time. Despite reports that home ownership is still viewed as a preferred long term investment, Google has found a significant increase in internet searches revolving around the possibility of a real estate crash. Indicating U.S. homeowners or potential homeowners are still keeping an eye out for a change in the real estate market.
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As the COVID-19 pandemic began to spread across the United States last spring and states announced shut downs, many Americans found themselves unemployed or underemployed. As a result, the federal government took swift action to provide mortgage payment relief by allowing homeowners to enter forbearance. A year later, as of March 2021, 2.5 million homeowners were still in forbearance, according to the Mortgage Bankers of America.
Realtor.com published an article, noting the opinions of experts who explain that, despite this alarming number of U.S. homeowners behind on payments, a potential foreclosure crisis is unlikely. In the article, reporter Sharon Lurye explains, the current housing market conditions are likely to provide a safety net for many of homeowners. Houses, in many parts of the United States, continue to be in high demand and the inventory remains low. Coupled with low interest rates, homeowners behind on payments, possible nearing the end of their forbearance, could still decide to sell the home for a profit. Additionally, as Americans getting their footing and learn to adjust to the current conditions, forbearance rates dropping nationwide.
Nevertheless, there are still areas of the country where homeowners are not only seriously behind on payments, but the housing market is not as strong due to weak economies and lack of employment. These homeowners will continue to need assistance by reaching out to their lender with the hopes of renegotiating the terms of their loan in a way that makes it feasible to make the payments. Still, some may decide to just sell and move to a rental property, assuming they can find a property to rend.
The good news, it seems that the U.S. isn’t headed toward a wide-spread foreclosure crisis, however there are Americans that continue to struggle and may for months and years to come.
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For the past several months, the housing market in many parts of the United States has seen phenomenal growth in the price of houses. Of course, high demand and low interest rates along with low inventory are to thank for the current climate in real estate. Nevertheless, it still leaves some Americans wondering, “is this a bubble that will burst soon?” Remember, it wasn’t so long ago that Americans saw home values increase rapidly, only to crash as a result of issues created by the sub-prime lending practices about 15 years ago.
Experts do agree that the rapid gains in housing prices are something to pay attention to. Experts estimate that about 5.5% of American home prices are overvalued. Additionally, unemployment levels have still not recovered from pandemic related layoffs and business closures. According to Suzanne Mistretta, senior director at Fitch Ratings, “Slowing employment recovery and still-high unemployment levels are not supportive of long-term sustainable price growth.”
In an article published by MarketWatch.com, journalist Jacob Passy is careful to point out that real estate and economy experts do not expect there to be a housing market crash, but predict that the housing market will cool off. The reason it won’t sustain the current rate is explained by Robert Dietz, chief economist at the National Association of Home Builders, “When home prices are growing faster than incomes, ultimately that is an unsustainable trend.”
As the reset of 2021 plays out, Americans may see interest rates increase modestly, which may slow the rise of housing prices. Some homeowners who requested forbearance on their mortgage, may not be able to resume the payments due to unemployment and decide to sell their homes instead of risk foreclosure. These additional homes going up for sale may also provide a relief in the demand and help prices remain steady.
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Many Americans interested in, not only the potential value of their home, but also other homes in their neighborhood, the homes of their friends or homes they dream to own someday, search Zillow.com to see the estimated value the site has calculated. Zillow.com, however, is looking to branch out beyond just providing home price estimates, they have begun to actually buy and sell homes and plan on making the process even easier.
In an article published by CNN Business, the new division of Zillow, called Zillow Offers has some new features to make the process of selling a home possible with just a few clicks of a mouse. As CNN Business reporter, Clare Duffy, details, “For certain homes, Zillow’s ‘Zestimate’— the online estimate of the home’s value — will now represent an initial cash offer from the company to buy the property. That could mean an even quicker timeline for homeowners looking to close a sale without going through the hassle of a formal listing, or a source of helpful data for would-be sellers who want to know how much money they’ll have to buy their next house.”
The Zillow Offers division of the company has been operating in a handful of markets for about three years now. They have been requesting information from homeowners in order to determine the cash offer from Zillow. The new, revamped process, soon to be available in 23 markets, will skip the required questionnaire and photos from the homeowner. Zillow is confident in the information currently available for many of the homes that the posted Zestimate would be the actual cash offer. A homeowner could simply contact Zillow to cash in on the Zestimate. After an inspection and adjustment made based on any repair issues, the sellers could pay a Zillow the seller’s fee and close the deal.
Skeptics doubt the accuracy of the posted home values. Yet, according to the article, Zillow’s COO Jeremy Wacksman points out, “For homeowners who decline Zillow’s cash offer, the difference between Zillow’s offer and what they end up selling for is typically less than 1%…”
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A look back at the first few weeks of 2021 and the national real estate market shows that home sales and the number of buyers increased in comparison to the last few weeks of 2020. Nevertheless, a low inventory of homes continues to create difficulty buying conditions for these would-be homeowners.
In an article published by CNBC.com, reported by Diana Olick, the housing market is compared to the beginning of 2020 where January 2021 is reported to have seen sales 23.7% higher than January of last year. According to the article, ‘“Home sales are continuing to play a part in propping up the economy,” said Lawrence Yun, chief economist for the NAR. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.”’
However, the availability of homes, in comparison to January 2020, was down 26%. This reported 1.9-month supply, compared to a January 2020 3- month supply, is the lowest ever reported. Of course, the low housing inventory coupled with the continued demand has allowed the median home price to increase a little over 14% since last January.
The article goes on to report new home sales and how builders have benefited from the shortages but also face supply and labor issues. Read the entire article.
The next few winter months are looking to be a pretty optimal time to sell a home. The mortgage rates continue to remain very low, demand for homes is high and there continues to be a drop in inventory compared to inventory a year ago. Chief economist at the National Association of Realtors®, Lawrence Yun proclaimed, “It will be one of the best winter sales years ever.”
Nevertheless, selling a home during a world-wide pandemic can offer challenges and sellers are still looking for ways to sell safely and for top dollar. An article published by Realtor.com, reported Erica Sweeney, has detailed some tips for homeowners selling homes over the next few months.
From a safety perspective, it is important to have a virtual tour available on the listing. This will allow shoppers to view the home online to get a better sense of the home layout and features. Doing this will help to keep the number of in-person showings to a minimum. When in-person showings are scheduled, masks and social distancing should be encouraged and larger time gaps between showings will help ensure the safety of all visitors. Once the prospective home buyers and agents have left the house, sanitizing all high touch surfaces will keep the home clean for the residents of the home.
Sweeney also gave tips of preparing and pricing a home. She reports, ‘According to a realtor.com report, the national median home listing price jumped 13.4% in December compared with last year, reaching $340,000, and price per square foot rose 15.9%.’ Sellers and their agents should ensure that they are pricing the house to align with the current market pricing. To add, highlighting upgrades and updates that buyers won’t have to worry about upon moving in during the winter months as well as features that accommodate work from home and e-learning from home will appeal to buyers that are in the midst of spending more time than normal at home.
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Photo Credit: Nathan Walker
As the new year rolled in, many have reflected on a year of unexpected and historic events and how they impacted many aspects of the lives of Americans. The real estate market had its share of ups and downs as Americans adjusted to new realities of shutdowns, spending more time at home, and mortgage rates that continue to remain exceptionally low. It leaves many real estate professionals and American homeowners and would-be home owners trying to predict what 2021 could possibly have in store for them.
In a piece published by Norada Real Estate Investments, written by Marco Santarelli, many questions for the future of the market in 2021 are posed and explanations and predictions are provided. The article addresses questions Americans might have about a potential affordability crisis, if the value of homes will continue to rise, what the trends in new home construction might be and whether or not a housing market crash is predicted in 2021.
Santarelli indicates, “While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition. Industry experts believe the housing market will remain strong and is set to break more records in 2021.” He describes how it continues to be a seller’s market and a continued rise in home prices could lead to affordability issues.
To add, some experts, such as Zillow Economic Research, predict that home values will, in fact, continue to increase. Some predictions call for a 3.6% increase over the next three months and appreciate of home value by up to 10% through the end of 2021.
As the demands for houses continues to outpace the availability, new home construction attempts to fill the gap. However, according to the article, “Land and material availability and a persistent skilled labor shortage will continue to place upward pressure on construction costs resulting in limited housing supply.”
Read the entire article for more predictions for 2021.
2020 has been a year full of the unexpected and has been unpredictable, to say the least. The economic effects of the pandemic have been staggering; businesses have had to close or make modifications that result in lost income, many Americans are collecting unemployment due to COVID-19 related layoffs. In this type of economic climate, it would be expected that the housing market and home prices would suffer as well.
Nevertheless, 2020 has brought drastic increases in home prices. According to an article published in Realtor Magazine, ” . Existing-home prices for all housing types jumped 15.5% year over year in October to $313,000, according to the National Association of REALTORS®.” In fact, this year’s home appreciation rate is the fastest appreciation rate the housing market has seen in 6 years.
The home value gains are seen across the United States. New York saw some of the lowest gains, being up 2.6% over the past year. However, areas in other parts of the Northwest, such as Maine, saw home values appreciate almost 15%. Western states are seeing values increase around 12 and 13 percent compared to last year.
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