Recently released data from the National Association of Realtors (NAR) suggests that a now is a great time to sell your home. The concept of ‘supply & demand’ reveals that the best price for an item is realized when the supply of that item is low and the demand for that item is high.
Let’s see how this applies to the current residential real estate market.
It is no secret that the supply of homes for sale has been far below the number needed to sustain a normal market for over a year at this point. A normal market requires six months of housing inventory to meet the demand. The latest report from NAR revealed that there is currently only a 3.6-month supply of houses on the market.
Supply is currently very low!
A report that was just released tells us that demand is very strong. The most recent Foot Traffic Report (which sheds light on the number of buyers who are actually out looking at homes) disclosed that “foot traffic grew 10.5 points to 52.4 in March as the new season approaches.”
Demand is currently very high!
Waiting to sell will only increase the competition between you and all of the other sellers putting their houses on the market later this summer. If you are debating whether or not to list your home, let’s get together to discuss the conditions in our market.
Mortgage interest rates have risen by more than half of a point since the beginning of the year, and many assume that if mortgage rates rise, home values will fall. History, however, has shown this not to be true.
Where are home values today compared to the beginning of the year?
While rates have been rising, so have home values. Here are the most recent monthly price increases reported in the Home Price Insights Report from CoreLogic:
- January: Prices were up 0.5% over the month before.
- February: Prices were up 1% over the month before.
- March: Prices were up 1.4% over the month before.
Not only did prices continue to appreciate, the level of appreciation accelerated over the first quarter. CoreLogic believes that home prices will increase by 5.2% over the next twelve months.
How can prices rise while mortgage rates increase?
Freddie Mac explained in a recent Insight Report:
“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”
If you are thinking about moving up to your dream home, waiting until later this year and hoping for prices to fall may not be a good strategy.
Starting late last year, some predicted that the 2018 tax changes would cripple the housing market. Headlines warned of the potential for double-digit price depreciation and suggested that buyer demand could drop like a rock. There was even sentiment that homeownership could lose its coveted status as a major component of the American Dream.
Now that the first quarter numbers are in, we can begin to decipher the actual that impact tax reform has had on the real estate market.
1. Has tax reform killed off home buyer demand? The answer is “NO.”
According to the Showing Time Index which “tracks the average number of buyer showings on active residential properties on a monthly basis” and is a “highly reliable leading indicator of current and future demand trends,” buyer demand has increased each month over the last three months and is HIGHER than it was for the same months last year. Buyer demand is not down. It is up.
2. Have the tax changes affected America’s belief in real estate as a long-term investment? The answer is “NO.”
Two weeks ago, Gallup released its annual survey which asks Americans which asset they believed to be the best long-term investment. The survey revealed:
“More Americans name real estate over several other vehicles for growing wealth as the best long-term investment for the fifth year in a row. Just over a third cite real estate for this, while roughly a quarter name stocks or mutual funds.”
The survey also showed that the percentage of Americans who believe real estate is the best long-term investment was unchanged from a year ago.
3. Has the homeownership rate been negatively impacted by the tax changes? The answer is “NO.”
Not only did the homeownership rate not crash, it increased when compared to the first quarter of last year according to data released by the Census Bureau.
In her latest “Z Report,” Ivy Zelman explains that tax reform didn’t hurt the homeownership rate, but instead, enhanced it:
“We have been of the opinion that homeownership is most highly correlated with income and the net effect of tax reform would be a positive, rather than negative catalyst for the homeownership rate. While still in the early innings of tax changes, this has proven to be the case.”
4. Has the upper-end market been crushed by new State and Local Taxes (SALT) limitations? The answer is “NO.”
In the National Association of Realtors latest Existing Home Sales Report it was revealed that:
- Sales between $500,000 and $750,000 were up 4.5% year-over-year
- Sales between $750,000 and $1M were up 15.1% year-over-year
- Sales over $1M were up 17.3% year-over-year
5. Will the reforms in the tax code cause home prices to tumble over the next twelve months? The answer is “NO.”
According to CoreLogic’s latest Home Price Insights Report, home prices will appreciate in each of the 50 states over the next twelve months. Appreciation is projected to be anywhere from 1.9% to 10.3% with the national average being 4.7%.
The doomsday scenarios that some predicted based on tax reform fears seem to have already blown over based on the early housing industry numbers being reported.
If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! Recently, the Institute for Luxury Home Marketing released its Luxury Market Report which showed that in today’s premium home market, buyers are in control.
The inventory of homes for sale in the luxury market far exceeds the number of people searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer or can be found at a discount.
Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call their house their new home.
The sale of your starter or trade-up house will help you come up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.
But not all who are buying luxury properties have a home to sell first.
A recent Bloomberg article gave some insight into what many millennials are choosing to do:
“A new generation of affluent homebuyers powered by a surge in inherited wealth is driving the luxury-home market, demanding larger spaces and fancier finishes, according to a report heralding ‘the rise of the new aristocracy.’”
The best time to sell anything is when demand is high, and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs and you are looking to step into a luxury home, now’s the time to list your house for sale and make your dreams come true.
I have recently moved my business to be affiliated with COMPASS. They are a new hybrid of real estate company that is part proprietary technology company and part traditional real estate firm. The proprietary technology puts our group light years ahead of those that are relegated to the past, while also providing outstanding personal service to the customer. This is the combination that I was looking for as my own company's sales vehicle, as I am totally on-board with excellent communication and customer service. COMPASS provides every high tech sales tool that we were sorely lacking as independent Brokers. We are proud to be a part of this company and I intend to pass every advantage that we have gained on to our customers. Welcome to a new era in Boston real estate!
Definitely an aggressive headline. However, as the final data on the 2017 housing market rolls in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME!
How did we finish 2017?
- New-home sales were at their highest level in a decade.
- Sales of previously owned homes were at their highest level in more than a decade.
- Starts of single-family homes were their strongest in a decade and applications to build such properties advanced to the fastest pace since August 2007.
And Bloomberg Business just reported:
“America’s housing market is gearing up for a robust year ahead. Builders are more optimistic, demand is strong and lean inventory is keeping prices elevated.”
And the National Association of Realtors revealed that buyer traffic is stronger this winter than it was during the spring buying season last year.
The only challenge to the market is a severe lack of inventory. A balanced market would have a full six-month supply of homes for sale. Currently, there is less than a four-month supply of inventory. This represents a decrease in supply of 9.7% from the same time last year.
With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Let’s get together to see whether that is the case in your neighborhood.
Whether you are buying or selling a home, it can be quite an adventurous journey. This is why you need an experienced real estate professional to guide you on the path to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 reasons you NEED a real estate professional in your corner haven’t changed, but have rather been strengthened by the projections of higher mortgage interest rates & home prices as the market continues to pick up steam.
1. What do you do with all this paperwork?
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.
2. Ok, so you found your dream house, now what?
There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you achieve your dream?
3. Are you a good negotiator?
So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyer (who wants the best deal possible) to the home inspection companies, to the appraiser, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.
4. What is the home you’re buying/selling really worth?
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to a study by Collateral Analytics, FSBOs achieve prices significantly lower than those from similar properties sold by real estate agents:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”
Get the most out of your transaction by hiring a professional.
5. Do you know what’s really going on in the market?
There is so much information out there on the news and on the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?
Dave Ramsey, the financial guru, advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a real estate professional?
We previously reported how a shortage of inventory in the starter and trade-up home markets is driving prices up and causing bidding wars, creating a true seller’s market. At the same time, in the premium home market, an over-abundance of inventory has started to see prices come down and put buyers in the driver’s seat, creating the beginning of a buyer’s market.
Last week, the National Association of Realtors released their Existing Home Sales Report which shed some additional light on the impact of inventory levels on sales in each price range.
The chart below shows the year-over-year difference in sales at each price range.
The under $100K range has shown declines in recent years due to the shortage of distressed homes available for sale (just 5% of sales this past month, compared to 35% in January 2012). Sales in the next two price ranges are no doubt being hindered by low inventory as buyers compete for the same home.
NAR’s Chief Economist, Lawrence Yun, explained:
"Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher."
The biggest surprise? This is the first time in years where the $1M and up price range had the highest jump in sales when compared to last year and to all other price ranges (29.1%)! The two price ranges right underneath the $1M range were a close second and third. As the price went up, so did the sales!
With additional inventory available in the higher price ranges, and the economy improving, many luxury buyers are finding it easier to find their dream homes. Yun commented,
“The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level.”
If you are one of the many homeowners who is looking to sell your starter or trade up home and move up to a luxury home, now is the time!
The housing market is really heating up and buyer demand is dramatically increasing as we enter the spring season. However, one challenge to the current market is a major shortage of inventory. Below are a few comments made in the last month by industry experts.
Lawrence Yun, Chief Economist of NAR
"Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau."
Jonathan Smoke, Chief Economist of Realtor.com
"Low inventories and tight credit will limit the gains we will see in 2016. However, given the level of pent-up demand evident in web activity and stated buyer intentions for 2016, we should see this spring materialize as the busiest season of sales since 2006."
Rick Sharga, Ten-X's EVP
"Inventory is too low to support much higher sales. There's virtually no inventory available at the entry level, and single family housing starts and permits continue to languish at levels far below where they should be at this point of the recovery."
David Crowe, Chief Economist of the National Assoc. of Home Builders
"Many sellers may not have an absolute decision as to whether to buy an existing home or a new home. So the low inventory of existing homes is locking them in place."
"Challenges remain, with low housing supply and declining affordability being a key concern in many markets."
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