What is Happening in the Real Estate Market?

We understand why you are wondering what is happening?
And probably what will happen in the near future.No one knows.

We found resources for a few pressing questions so that you can stay in the know!

Is the power shifting in the market?
Taylor Marr, the deputy chief economist at Redfin, says, “As sellers adjust their behavior it’s already changing the housing market.”

“The housing market isn’t crashing, but it is experiencing a hangover as it comes down from an unsustainable high,” Marr said in a statement to Insider, adding that a lot of home sellers are already beginning to drop their asking prices.

Will home prices come down quickly?
NextAdvisor produced an article this week that says, “Experts say it’s unlikely prices will drop in any significant way nationwide anytime soon. And while the rate at which home prices are rising will slow, that’ll likely come because fewer people can afford to shop in a pricier market. On a local level, individual markets might see prices come down, but experts say a big drop across the board is unlikely barring a big economic shift.”

The State of the Nation’s Housing Report

 

The Joint Center for Housing Studies of Harvard University published The State of the Nation’s Housing 

The report is very interesting, but a bit dense, so we compiled a few of the most interesting pieces (with page number references) below!

 

Housing construction at an all time high (page5)

“Single Family stats hit 1.1 million in 2021, exceeding the million-unit mark for the first time in 13 years. Multifamily starts were also at a 30-year high of 470,000 units. The last time housing production was nearly as high was 1973.”

 

The outlook (page 8)

“Assuming that the Federal Reserve can take runaway inflation without causing a series downturn, the near term outlook for housing demand is largely positive. Demographic shifts are favorable, unemployment is low, and wage growth remains strong. Conditions on the supply side are also encouraging, with supply-chain delays diminishing and a record number of homes set for completion in the coming months.”

 

Home Price Appreciation Set New Records in the Past Year (Page 9)

 

“This song trajectory left home prices 38.6% above their early 2020 level and more than double the 2012 low. Indeed nominal home prices stood 59.5% above the mid-2000s peak early this year while the real home prices were up 14.4%.”

For sale inventory at an all time low (page 11)

“Fewer existing homes were available for sale in January 2022 than at any point since the late 1990s.

 

Home Equity Growth (page 27)

 

Housing Challenges (page 37)

Section 6 of the The State of the Nation’s Housing  presents some of the challenges we may face in the future.

 

Click here to read the entire State of the Nation’s Housing Report.

Five Steps to Making an Excellent Buying Decision

This week we partnered with Fairway Independent Mortgage in Knoxville, TN to answer the question “How do I make an excellent buying decision in this market?”

Branch Manager, Corey Freels shares his opinion with us:

According to a recent Gallup poll , only 30% of Americans believe it’s a “good time” to buy a home, while 69% of Americans believe it’s a “bad time”.  What’s perhaps more interesting is 7 in 10 Americans believe home prices will rise in their local areas… and as a whole, Americans believe real estate is the best long-term investment.

If 70% of us believe prices will continue to rise, and as a whole we believe housing to be the best long-term investment, then why do we also believe it’s a bad time to buy? 

Does something feel amiss here to you, too?

Well, if you work in the real estate industry OR you’ve waded into the treacherous waters of homebuying over the past two years, this might not surprise you all that much.  Interest rates are at their highest level in 13 years. 

Home prices are up 20% year over year nationally. Goodness, one study reports that half of Americans physically cried  at one point or more during the process. 

 

So, why in the world would we dip our toe into the housing market right now?? 

What was my greatest fear during the last two years of cheap mortgage rates, crippling supply, and a buying frenzy?  It was that we were subsequently pricing an entire generation (or more) out of owning their own home. 

I could write an entire article on the importance of the housing industry to the entire American economy, and its impact on net worth and social mobility.  Perhaps I will, but for now take my word for it: it’s crucial, non-negotiable, essential. 

You can make a great long-term buying decision in this market, and those that do will have taken advantage of what might be a generational buying opportunity. 

Housing is a basic human need (food, shelter, water) and there is no alternative.  You will participate in the housing market one way or another.  You can pay your own mortgage or cover your landlord’s.  The choice is yours. 

Whether or not you should buy a home, trade up, or sell your current home is far more about you individually than it is about market conditions. 

What volatile markets ARE good for, however, is making us stop and think so that we make a really good decision.  This is something we should be doing all of the time. 

 

Five Steps to Making an Excellent Buying Decision 

  1. Know your numbers – know what monthly payment you are comfortable with, how much cash you will need at closing, and how much you will have left over for a rainy day.  This is impossible without first meeting with a trusted mortgage advisor.  Put a lot of work and thought into this; it’s important. When you get comfortable with these numbers, do not waver.
  2. Manage your expectations – this is a deep concept, and you need a trusted real estate agent to walk you through it.  Maybe the home that was personally decorated by Joanna Gaines and has a pool with a waterfall in the back yard is out of reach, and that’s okay.  Think long term, which brings us to the next point.
  3. Think LONG term – some advice I got early on that has stuck and holds true: don’t buy a home you couldn’t OWN for 10 years. And I’m not talking about utopia here, I mean worse case, the world falls apart, will this house work for 10 years? 
  4. Fear scape – this is something you won’t read often as given advice.  Let your mind play out your fears.  A job loss, an illness, the market turns, etc.  Let your mind chase down those scenarios to their end, and then realistically see how prepared you are for those scenarios.  You’ll often find that the worst case isn’t all that bad, and that you could make things work. And then, LET IT GO.
  5. LET IT GO – there, we’ve given our mind time to be afraid, to think this through.  Now, we make decision on what we KNOW.  We know WHY we want our own home.  We know WHAT we’re looking for.  We also know WHAT we can afford.  Now, you’re ready. 

 

With the right counsel in a great mortgage lender and a great agent, you can absolutely make a great buying decision in this market.  And this market, unlike the past two years, will present opportunities for the majority of buyers who were left out of the frenzy. 

For two years, buyers with seemingly unlimited resources have dominated the market.  Now, they’re either all bought out or they’re afraid.  It’s your opportunity to participate in one of the greatest wealth building vehicles available to everyone. 

Feeling some fear about buying a home is completely normal.  I know I did.  But letting fear prevent you from making a wise decision is not productive, and we need to let logic lead us to the right conclusions. 

Fortune favors the bold, and this market will prove to be opportune for those that are bold. 

 

Fairway Independent Mortgage in Knoxville, TN can help with any of your mortgages needs!  

 

How will the interest rate increase effect both buyers and sellers?

Everyone is wondering, “How will interest rate increases effect both buyers and sellers?”

We’ve pulled together some statements from industry experts to help keep you informed!

For Buyers:
Business Insider provides a general rule of thumb – every percentage point increase in interest rates corresponds to a 10% decrease in purchasing power. In other words, a buyer who could afford $2,000 monthly payments on a $414,000 home with a 3% mortgage, could only afford a $320,000 house with a 6% mortgage.

Jacob Channel, LendingTree’s senior economist states, “Though it’s unlikely that home prices will majorly slump, an increase in housing supply will likely significantly slow home price growth and give would-be buyers more housing options to choose from.”

For Sellers:
Mark Zandi, the chief economist at Moody’s Analytics, says, “I don’t expect a collapse in house prices,” he says. He is not predicting a housing crash anything like what we saw 15 years ago, because of two fundamental forces supporting home prices.

The fundamental forces supporting current home prices are:
1. Supply – there is a shortage of homes available
2. We no longer have reckless mortgage lending – people can afford their loans.

Have any specific questions – email us at info@jasonwhiteteam.com and we’ll do our best to answer them!

Is the Housing Market Crashing?

Banyan Hill says, ” the Housing market isn’t crashing!”

Google searches for ” Housing crash ” have surged in recent years.

It’s easy to understand the concern- home equity accounts for 65% of the net worth of the average American.

The latest data shows why a housing market crash isn’t a concern:

Homebuilder’s got a wake up call.

New home sales dropped by 16.6% between March and April which supplied the largest inventory in new homes since 2010! It would take 9 months to sell out inventory at last month’s sales pace.

The stage is set for higher home prices

Low levels of existing inventory will continue to drive prices. 

Demand remains high

Future demand should remain strong due to to rising rents. 

Is the housing market crashing?

 

Steven Fernandez, research analyst for Strategic Fortunes, says “Keep in mind the rapid growth we’ve seen since 2020 is an anomaly. I wouldn’t bank on growth of that magnitude to continue”

 

Check out our blogs on the Sevier County, TN real estate marketing statistics and national housing market statistics.

Lumber Prices Fall!

Realtor® Magazine released an article this week acknowledged the recent tumble of lumber prices, to the lowest level in 2022!

Lumber fell below $800 per thousand board feet on Monday, and prices are down 30% to date this year.

It might not be time to celebrate yet, while lumber prices are down, they are up significantly from historical levels.

According to National Home Builders Association data, volatile lumber price swings have been blamed for pushing up the average price of a single-family home, causing more than $18,000 of that over the past year.

“We expect prices in the long term to be challenged with the affordability and rising interest rate headwinds,” Kyle Little, COO of Sherwood Lumber, told Market Insider.

How is Today Different from the Great Recession Housing Bubble?

Feel like you might be noticing some similiarities?

Fortunately, today’s circumstances are driven by very different reasons! 

In 2006, the lending practices were much more lax. Underwriting was more loose and there were different mortgage products such as adjustable-rate mortgages with big balloon payments due at the end of the term. 

“Today it’s really just about lack of supply,” says Robert Dietz, chief economist at the National Association of Home Builders.

There are two main ways homes enter the market and both of them are not in full flow. 

  1. Builders are struggling to catch up. 

Deitz blames the constraints in the market to what he calls the “five Ls”:

  • Labor
  • Lots
  • Lending
  • Lumber and building materials
  • Laws and regulations
  1. Fewer people are selling.Feel like you might be noticing some similiarities?Fortunately, today’s circumstances are driven by very different reasons! 

A survey by Discover Home Loans found 79% of homeowners would rather renovate their homes than move.

There are more buyers deciding that home ownership is for them! 

Part of that is millennials entering the market and part of that is due to the fact that the pandemic has made remote and hybrid work possible for many. 

When will the market slow down?

Experts surveyed by Zillow predicted it’ll be two years before monthly inventory returns to pre-pandemic norms. They estimated it could be 2024 or 2025 before the portion of first-time buyers again reaches the 45% seen in 2019.

Will rising mortgage rates slow demand?

Dietz says. “The bidding wars are going to cool off.”

Any slowdown caused by higher mortgage rates will make the market a little easier for buyers who are patient, Fairweather says. “By end of summer there should be more homes on the market as not as many buyers will be taking them off the market,” she says.

The market could be in for a shift this year as it copes with higher mortgage rates, Fairweather says. You may want to slow down and consider your options. “I don’t think it’s wise to try to rush the market now because right now the market is adjusting,” she says.

What Economists Say about Home Prices in Quarter Two!

Everyone is curious – what will home prices do during quarter two?

Economist can’t predict exactly what will happen to home prices in quarter two.

Luck for us,  MarketWatch rounded up a few of the top economists options for the near future.

Below are a few of their predictions:

Holden Lewis, mortgage expert from NerdWallet says, “Home prices have been rising fast, and we might see a slowdown beginning in April as home buyers cope with skyrocketing mortgage rates.”

 

 

Bankrate analyst, Jeff Ostrowski, says “The shortage of homes means we can expect prices to remain high during the spring home buying season.”

 

 

Lawrence Yun, chief economist for the National Association of Realtors, predicts, “ There’s an acute shortage of inventory and many properties have multiple offers on them, despite higher mortgage rates. Some believe the interest rates will rise even more if they wait and thereby further push up demand. Home price growth on a 12-month basis should be on solid double digit appreciation through the spring months.” 

 

Home shortage – here’s why!

The U.S. is more than 3 million homes short of the demand from would-be homebuyers, according to Freddie Mac. 

NPR states, “Pandemic-related supply chain problems aren’t helping. They’re adding tens of thousands of dollars in cost to the typical house. But the roots of the problem go back much further — to the housing bubble collapse in 2008.”

How so?

As homebuilders went out of business during the crash, tradespeople found other work, or got trained for new jobs. 

For more than a decade, building stayed below normal. 

Then the largest generation, millennials, entered the housing market. 

Here we are – millions of homes short. 

How do we rectify the issue?

Emerson Claus, president of the Home Builders and Remodelers Association of Massachusetts, suggests small homes on less land an/or townhomes

Claus discusses a few things standing in the way of allowing this to happen here. 

 

What do rising mortgage rates mean for purchasing power?

What do rising mortgage rates mean for purchasing power? Read below to find out how much rates have increased,  an example how how the rate increase effects the lifetime cost of a mortgage, and and a comparison of previous yearly rates.

 

Mortgage rates jumped above 4% to their highest level since April 2019. Specifically, the 30-year fixed mortgage rate rose to 4.16% from 3.85% the previous week.

 

The National Association of Realtors signaled multiple times before that mortgage rates would rise in response to the Federal Reserve’s strategy of raising short-term interest rates.

 

Although the Federal Reserve doesn’t set up mortgage rates, a higher rate for banks typically makes borrowing more expensive, affecting the 10-year Treasury bond – an indicator for mortgage rates.

 

NAR expects mortgage rates to average around 4.3% at the end of the year.

 

What does this mean for purchasing power?

 

Forbes Advisor provides a clear example of how a 1% rate increase impacts the lifetime cost of a home mortgage loan.

 

Take a family shopping around for a $300,000 30-year, fixed-rate mortgage. If banks were offering them an interest rate of 3.5%, the total lifetime cost of the mortgage would be approximately $485,000, with nearly $185,000 of that accounting for interest charges. Monthly payments would clock in around $1,340.

 

Let’s say the Fed had raised interest rates by 1% before the family got a loan, and the interest rate offered by banks for a $300,000 home mortgage loan rose to 4.5%. Over the 30-year life of the loan, the family would pay a total of more than $547,000, with interest charges accounting for $247,000 of that amount. Their monthly mortgage payment would be approximately $1,520.

 

Even with the rising rates – today’s rates are still favorable

 

Rates around 4% are still fairly low compared to historical figures.

 

Annual averages over the past two decades from the Freddie Mac survey, which follows similar trends to the Bankrate survey used in this article, show that rates remain quite favorable compared to what they were in fairly recent memory.

 

Rates have risen sharply this year but they still are favorable when compared to levels seen in the fairly recent past.

 

Before the 2008 crash, “good” rates were still above 5%, and rates were well above 4% as recently as 2018 and 2019.