Robert Darrow, Broker Associate
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Whether or not you owned a home in 2008, you likely remember the housing crash that took place back then. And news about an economic slowdown happening today may bring all those concerns back to the surface. While those feelings are understandable, data can help reassure you the situation today is nothing like it was in 2008.
One of the key reasons why the market won’t crash this time is the current undersupply of inventory. Housing supply comes from three key places:
For the market to crash, you’d have to make a case for an oversupply of inventory headed to the market, and the numbers just don’t support that. So, here’s a deeper look at where inventory is coming from today to help prove why the housing market isn’t headed for a crash.
Even though housing supply is increasing this year, there’s still a limited number of existing homes available. The graph below helps illustrate this point. Based on the latest weekly data, inventory is up 27.8% compared to the same week last year (shown in blue). But compared to the same week in 2019 (shown in the larger red bar), it’s still down by 42.6%.
So, what does this mean? Inventory is still historically low. There simply aren’t enough homes on the market to cause prices to crash. There would need to be a flood of people getting ready to sell their houses in order to tip the scales toward a buyers’ market. And that level of activity simply isn’t there.
There’s also a lot of talk about what’s happening with newly built homes today, and that may make you wonder if we’re overbuilding. But home builders are actually slowing down their production right now. Ali Wolf, Chief Economist at Zonda, notes:
“It has become a very competitive market for builders where they are trying to offload any standing inventory.”
To avoid repeating the overbuilding that happened leading up to the housing crisis, builders are reacting to higher mortgage rates and softening buyer demand by slowing down their work. It’s a sign they’re being intentional about not overbuilding homes like they did during the bubble.
And according to the latest data from the U.S. Census, at today’s current pace, we’re headed to build a seasonally adjusted annual rate of about 1.4 million homes this year. While this will add more inventory to the market, it’s not on pace to create an oversupply because builders today are more cautious than the last time when they built more homes than the market could absorb.
The last place inventory can come from is distressed properties, including short sales and foreclosures. Back in the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to secure a home loan they couldn’t truly afford. Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from ATTOM Data Solutions on properties with foreclosure filings to help paint the picture of how things have changed since the crash:
This graph shows how in the time around the housing crash there were over one million foreclosure filings per year. As lending standards tightened since then, the activity started to decline. And in 2020 and 2021, the forbearance program was a further aid to help prevent a repeat of the wave of foreclosures we saw back around 2008.
That program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.
Although housing supply is growing this year, the market certainly isn’t anywhere near the inventory levels that would cause prices to drop significantly. That’s why inventory tells us the housing market won’t crash.
If you’re thinking about selling your house, you may have heard about the housing market slowing down in recent months. While it’s still a sellers’ market, the peak frenzy the market saw over the past two years has cooled some. If you’re asking yourself if you’ve missed your chance to sell your house and make a move, the good news is you haven’t – motivated buyers are still out there. But you do need to price your house right for today’s market. Here’s why.
As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”
It’s true buyer demand has slowed over the past few months as higher mortgage rates made it more expensive to buy a home. The result is fewer bidding wars and less competition among buyers (see visual below):
But don’t forget – that’s compared to the severely overheated market we saw over the past two years. According to the latest Confidence Index from NAR:
“. . . 39% of homes sold above list price, down from 51% a month ago and 50% a year ago.”
While this is a slower pace than even one month ago, serious buyers are still actively in the market, and they’re buying homes that are priced right. In fact, the Confidence Index also notes the average home is selling in just 14 days.
If you’re aiming to sell your house, be sure you’re working with your agent to price it for today’s housing market. As buyer demand softens, it’s important to understand this isn’t the same market as last year. It’s not even the same market as just a few months ago. But it is still a sellers’ market.
If you’re ready to sell your house, seek the advice of a real estate professional. In some cases, you’ll need to adjust your expectations accordingly to meet the market where it is today. Selma Hepp, Interim Lead, Deputy Chief Economist at CoreLogic, explains what’s happening and what it means when you sell:
“Signs of a broader slowdown in the housing market are evident, . . . This is in line with our previous expectations and given the notable cooling of buyer demand due to higher mortgage rates. . . . Nevertheless, buyers still remain interested, which is keeping the market competitive — particularly for attractive homes that are properly priced.”
While the housing market has cooled from its overheated frenzy, it’s still a sellers’ market. Let’s connect so you understand what’s happening with buyer demand and home prices in our local area as you get ready to enter the market.
Whether you’ve just retired or you’re thinking about retirement, you may be considering your options and trying to picture a whole new stage of your life. And you’re not alone. Research from the Retirement Industry Trust Association (RITA) shows 10,000 Baby Boomers reach the typical retirement age (65) every day, and only 47% of the people in that generation have already retired.
If this sounds like you, one thing worth considering is whether or not your current home will suit your new lifestyle. If your home doesn’t have the features or benefits you’re looking for, the good news is, you may be in a better position to move than you realize.
That’s because, if you already own a home, you’ve likely built-up significant equity, and that can help you fuel your next move. According to the National Association of Realtors (NAR):
“A homeowner who purchased a typical home five years ago would have gained $125,300 from just price appreciation alone.”
In fact, over the last twelve months, CoreLogic reports the average homeowner in the United States gained roughly $64,000 in equity due to home price appreciation.
You can use your equity to help you achieve your homeownership goals. Whether you want to downsize, move closer to loved ones, or buy a home in a dream destination, your equity can help get you there. It may be some (if not all) of what you’d need as your down payment on a home that better fits your changing needs.
To find out how much equity to have in your home, reach out to a trusted real estate professional today.
Retirement is a big step and so is buying or selling a home. As you move into this new phase of life, let’s connect so you have an expert to guide you through the process as you sell your current home and give you expert advice as you buy one that’ll better suit your needs.
If you’re wondering if home prices are going to come down due to the cooldown in the housing market or a potential recession, here’s what you need to know. Not only are experts forecasting home prices will continue to appreciate nationwide this year, but most of them also actually increased their projections for home price appreciation from their original 2022 forecasts (shown in green in the chart below):
As the chart shows, most sources adjusted up, and now call for more appreciation in 2022 than they originally projected this January. But why are experts so confident the housing market will see ongoing appreciation? It’s because of supply and demand in most markets. As Bankrate says:
“After all, supplies of homes for sale remain near record lows. And while a jump in mortgage rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials.”
Knowing that experts forecast home prices will continue to appreciate in most markets and that they’ve actually increased their original projections for this year should help you answer the question: will home prices fall? According to the latest forecasts, experts are confident prices will continue to appreciate this year, although at a more moderate rate than they did in 2021.
If you’re worried home prices are going to decline, rest assured many experts raised their forecasts to say they’ll continue to appreciate in most markets this year. If you have questions about what’s happening with home prices in our local area, let’s connect.
According to a recent survey from the Wall Street Journal, the percentage of economists who believe we’ll see a recession in the next 12 months is growing. When surveyed in July 2021, only 12% of economists consulted thought there’d be a recession by now. But this July, when polled, 49% believe we will see a recession in the coming 12 months.
And as more recession talk fills the air, one concern many people have is: should I delay my homeownership plans if there’s a recession?
Here’s a look at historical data to show what happened in real estate during previous recessions to help prove why you shouldn’t be afraid of what a recession would mean for the housing market today.
To show that home prices don’t fall every time there’s a recession, it helps to turn to historical data. As the graph below illustrates, looking at the recessions going all the way back to 1980, home prices appreciated in four of the last six recessions. So, historically, when the economy slows down, it doesn’t mean home values will fall.
Most people remember the housing crisis in 2008 (the larger of the two red bars in the graph above) and think another recession would repeat what happened then. But this housing market isn’t about to crash. The fundamentals are very different today than they were in 2008. So, don’t assume we’re heading down the same path.
Research also helps paint the picture of how a recession could impact the cost of financing a home. As the chart below shows, historically, each time the economy slowed down, mortgage rates decreased.
Fortune explains that mortgage rates typically fall during an economic slowdown:
“Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”
And while history doesn’t always repeat itself, we can learn from and find comfort in the historical data.
There’s no doubt everyone remembers what happened in the housing market in 2008. But you don’t need to fear the word recession if you’re planning to buy or sell a home. According to historical data, in most recessions, home price gains have stayed strong, and mortgage rates have declined.
If you’re thinking about buying or selling a home, let’s connect so you have expert advice on what’s happening in the housing market and what that means for your homeownership goals.
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Whether you’re a potential homebuyer, seller, or both, you probably want to know: will home prices fall this year? Let’s break down what’s happening with home prices, where experts say they’re headed, and why this matters for your homeownership goals.
In 2021, home prices appreciated quickly. One reason why is that record-low mortgage rates motivated more buyers to enter the market. As a result, there were more people looking to make a purchase than there were homes available for sale. That led to competitive bidding wars which drove prices up. CoreLogic helps explain how unusual last year’s appreciation was:
“Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”
In other words, the pace of appreciation in 2021 far surpassed the 6% the market saw in 2020. And even that appreciation was greater than the pre-pandemic norm which was typically around 3.8%. This goes to show, 2021 was an anomaly in the housing market spurred by more buyers than homes for sale.
This year, home price appreciation is slowing (or decelerating) from the feverish pace the market saw over the past two years. According to the latest forecasts, experts say on average, nationwide, prices will still appreciate by roughly 10% in 2022 (see graph below):
Why do all of these experts agree prices will continue to rise? It’s simple. Even though housing supply is growing today, it’s still low overall thanks to several factors, including a long period of underbuilding homes. And experts say that’s going to help keep upward pressure on home prices this year. Additionally, since mortgage rates are higher this year than they were last year, buyer demand has slowed.
As the market undergoes this change, it’s true price appreciation this year won’t match the feverish pace in 2021. But the rapid appreciation the market saw last year wasn’t sustainable anyway.
Today, the market is beginning to move back toward pre-pandemic levels. But even the forecast for 10% home price growth in 2022 is well beyond the 3.8% that’s more typical for a normal market.
So, despite what you may have heard, experts say home prices won’t fall in most markets. They’ll just appreciate more moderately.
If you’re worried the house you’re trying to sell or the home you want to buy will decrease in value, you should know experts aren’t calling for depreciation in most markets, just deceleration. That means your home should still grow in value, just not as fast as it did last year.
If you’re thinking of making a move, you shouldn’t wait for prices to fall. Experts say nationally, prices will continue to appreciate this year, just at a more moderate pace. When you’re ready to begin the process of buying or selling, let’s connect so you have a local market expert on your side each step of the way.
There’s no doubt about the fact that the housing market is slowing from the frenzy we saw over the past two years. But what does that mean for you if you’re thinking of selling your house?
While home prices are still appreciating in most markets and experts say that will continue, they’re climbing at a slower pace because rising mortgage rates are creating less buyer demand. Because of this, there are more homes on the market. And in a shift like this one, the way you price your home matters more than ever.
During the pandemic, sellers could price their homes higher because demand was so high, and supply was so low. This year, things are shifting, and that means your approach to pricing your house needs to shift too.
Because we’re seeing less buyer demand, sellers have to recognize this is a different market than it was during the pandemic. Here’s what’s at stake if you don’t.
The price you set for your house sends a message to potential buyers. If you price it too high, you run the risk of deterring buyers.
When that happens, you may have to lower the price to try to reignite interest in your house when it sits on the market for a while. But be aware that a price drop can be seen as a red flag for some buyers who will wonder what that means about the home or if in fact it’s still overpriced. Some sellers aren’t adjusting their expectations to today’s market, and realtor.com explains the impact that’s having:
“. . . the share of listings with a price cut was nearly double its year ago level even as it remains well below pre-pandemic levels.”
To avoid the headache of having to lower your price, you’ll want to price it right from the onset. A real estate advisor knows how to determine that perfect asking price. To find the right price, they balance the value of homes in your neighborhood, current market trends and buyer demand, the condition of your house, and more.
Not to mention, pricing your house fairly based on market conditions increases the chance you’ll have more buyers who are interested in purchasing it. This helps lead to stronger offers and a greater likelihood it’ll sell quickly.
Rest assured, it’s still a sellers’ market, and you’ll still get great benefits if you plan accordingly and work with an agent to set your price at the current market value. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”
Mike Simonsen, the Founder and CEO of Altos Research, also notes:
“We can see that demand is still there for the homes that are priced properly.”
Homes priced right are selling quickly in today’s real estate market. Let’s connect to make sure you price your house based on current market conditions so you can maximize your sales potential and minimize your hassle in a shifting market.
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