Is history repeating itself?

Rapid price increases will not last forever.

The current growth in home prices is echoing the lead-up to the recession.  Is history repeating itself?


The answer is likely not, according to a recently released® report.  Building is lacking in many markets—one hallmark 10 years ago was over-construction—and credit standards are more stringent, says Danielle Hale, chief economist of

“As we compare today’s market dynamics to those of a decade ago, it’s important to remember rising prices didn’t cause the housing crash,” Hale says.  It was rising prices stoked by subprime and low documentation mortgages, as well as people looking for short-term gains—versus today’s truer market vitality—that created the environment for the crash.”

In 2016, home prices (the national median home sales price) were 2 percent higher than they were in 2006, the report reveals. Pre-recession prices have returned in 31 of the 50 largest metropolitan areas.

In contrast with 2006, however, are today’s credit conditions. Currently, the median FICO score for a mortgage is 734; the median in 2006 was 700.

Builds and flips are also different from 2006—starkly.  The credit environment, among other factors, is keeping a lid on unfettered flipping and over-construction.  In 2006, one household formation generally equaled 1.4 single-family housing starts; in 2016, that number shrank to 0.7 single-family starts.  Flips accounted for 5 percent of sales in 2016; in 2006, they comprised 8.6 percent.

“Lending standards are critical to the health of the market,” says Hale.  “Unlike today, the boom’s under-regulated lending environment allowed borrowing beyond repayable amounts and atypical mortgage products, which pushed up home prices without the backing of income and equity.”

Additionally, economic indicators point elsewhere.  Employment was healthy then and is now, but inventory is limited more today—at a 20-year low.  Presently, the average months supply is 4.2; in 2007, the average months supply was 6.4.


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Home prices continue to rise- what is the good news for buyers?

Mortgage Rates Remain Low

According to the National Association of Realtors, the median existing home price climbed to $252,800 in May, the exceeding the peak hit in June 2016 of $247,600.

Home prices have been rising every month for more than five years.

Cities across the U.S. are facing major housing shortages, which means buyers have to compete for homes with bidding wars and offers well above asking price.

“Prices are moving up and properties are moving quickly,” said Danielle Hale, NAR’s managing director of housing research.

Builders aren’t building enough houses to keep up with demand and current homeowners are hesitant to list their properties because they’re worried they won’t be able to buy a new home.

But there has been one saving grace for buyers: mortgage rates, says CNN Money.

Even though the Federal Reserve has begun raising interest rates, mortgages have been hovering below 4% recently. Last week, the average rate of a 30-year fixed mortgage ticked down to 3.90%.

With the Fed raising rates, interest rates are expected to gradually rise over time, but should stay pretty low for the foreseeable future.


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Recent New Home Sales Surge Nationally Despite Slowly Rising Mortgage Interest Rates and Possible Fed Tapering

real estate investment

As we head towards the end of 2013, and into the start of 2014, there are some noteworthy national trends in real estate that are worth watching. These primarily center on the increasing likelihood of rising mortgage interest rates, as well as the possibility of the Federal Reserve beginning to taper, or slow down, its long-running bond buyback program. Both trends could foretell significant changes in the real estate market nationally in 2014.

In spite of these emerging trends, there are some other numbers worth noting in terms of the national real estate market that could also impact the coming year. One of these is that new home sales surged in October 2013 by 25% from the previous month, according to a report released by the U.S. Department of Commerce.

According to Keith Gumbinger, Vice-President of the mortgage information site HSH Associates, “It may very well be that a lot of folks are feeling better about their prospects and buying a new home.” In addition, Gumbinger also stated that there has been a general ease of financing for buyers, as “builders are motivated to get folks into homes.” Finally, Gumbinger also said that inventories of existing homes are thin in several markets, prompting people to build new homes rather than buy old ones.

The largest trend, however, in the coming year will center on the very real possibility of rising mortgage interest rates, especially since the Fed is currently weighing whether or not to start with tapering, or reducing the amount and scale to the Fed has been buying back bonds and securities since the 2008 financial crisis. The key to any real impacts will center on job and wage growth in the economy as a whole, and rising home prices will also have an impact as to whether or not there will be more buyers and sellers on the market in the coming year. At this point, it is too early to state how much of an impact this will have on the market, even though mortgage rates, from a more historical perspective, still remain low by comparison.

In view of these emerging trends, as well as recent surges in both home prices and new home sales nationally, there has never been a better time to find the home of your dreams, right here in the Great Smoky Mountains! Please feel free to browse our available inventory of properties, and see the many varieties of properties that we currently have here in the Smokies! Let us help you realize your home ownership dreams today!


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The Jason White Team
Century 21 Four Seasons Realty
1441 Wiley Oakley Dr
Gatlinburg, TN 37738
Toll Free: 877-678-2121
Fax: 865-436-7227

Federal Reserve’s Decision Wednesday to Continue Stimulus Could Keep Short-Term Interest Rates Low for Immediate Future

Real Estate Investing

On Wednesday, the Federal Reserve made the announcement that it would continue its long-running stimulus program of asset purchases and low interest rates. The Fed was widely expected to continue adding $85 billion a month to its portfolio of Treasury securities and mortgage-backed securities, particularly after the disruptive partial shutdown of the federal government in the first half of October.

The Fed maintained a relatively optimistic economic outlook in the statement, released after a scheduled two-day meeting of its policy-making committee. It said the economy continued to expand “at a moderate pace” and that the availability of jobs continued to improve.

“Taking into account the extent of federal fiscal retrenchment over the past year, the committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy,” the Federal Open Market Committee said in its statement. “However, the committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

As a result of the Fed’s decision, the expectations are that short-term interest rates will remain low, at least for the immediate future. Fears about higher interest rates, especially on mortgages, have been on the rise since the Fed had also recently indicated a slowdown, or tapering, of its ongoing stimulus program. Fed officials had spent much of the summer preparing investors for a retreat from the bank’s stimulus campaign before the end of the year. That remains a possibility: The Fed’s policy-making committee is scheduled to meet for the final time this year in mid-December. However, no timetable or other decision on any tapering is expected from the Fed until at least mid-December, at the earliest.

What does this all mean for you? With low short-term interest rates still anticipated for at least the immediate future, there are many great deals and properties available here in the Great Smoky Mountains, with many types of homes and great deals still available! Please feel free to browse our available properties today, and let us help you find the home of your dreams!

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The Jason White Team
Century 21 Four Seasons Realty
1441 Wiley Oakley Dr
Gatlinburg, TN 37738
Toll Free: 877-678-2121
Fax: 865-436-7227