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2020 Home buyer Preferences [INFOGRAPHIC]
![2020 Homebuyer Preferences [INFOGRAPHIC] | MyKCM](https://desireestanley.com/files/2020/08/20200807-MEM-1046x1789.jpg)
![2020 Homebuyer Preferences [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2020/08/06112131/20200807-MEM-1046x1789.jpg)
Some Highlights
- A recent study from HarrisX shows the current health crisis isn’t slowing down today’s homebuyers.
- Many buyers are accelerating their timelines to take advantage of low mortgage rates, and staying home has enabled some to save more money to put toward a down payment.
- Let’s connect today if your needs have recently changed and you’re ready to make a move this year.
Three of the Latest Reports Show Housing Market Is Strong
The residential real estate market is remaining resilient as the country still struggles to beat the COVID-19 pandemic. Three separate reports recently revealed how the housing market is still showing growth. Here’s a look at each one.
1. Ivy Zelman’s Real Estate Broker Survey
The survey explains that purchaser demand remains strong:
“This month’s overall homebuyer demand rating…was easily the strongest sequential gain in our survey history…Strength continues to be led by the entry-level…While high-end demand is less robust in an absolute sense, there has also been relative improvement, with contacts attributing incremental improvement to the stock market’s rebound, record low mortgage rates and luxury customers trading out of high-priced cities.”
2. The National Association of Home Builders Housing Market Index
The index reveals that builder confidence has returned to levels last seen prior to the pandemic:
“In a strong signal that the housing market is ready to lead a post-COVID economic recovery, builder confidence in the market for newly-built single-family homes jumped 14 points to 72 in July, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI now stands at the solid pre-pandemic reading in March before the outbreak affected much of the nation.”
3. The realtor.com Housing Market Recovery Index
This index leverages a weighted average of four key components of the housing industry, tracking each of the following:
- Housing Demand – Growth in online search activity
- Home Price – Growth in asking prices
- Housing Supply – Growth of new listings
- Pace of Sales – Difference in time-on-market
It then compares the current status “to the last week of January 2020 market trend, as a baseline for pre-COVID market growth. The overall index is set to 100 in this baseline period. The higher a market’s index value, the higher its recovery and vice versa.”
The latest results came in at 101, with realtor.com explaining:
“The U.S. Housing Market has recovered from the immediate disruption caused by the COVID pandemic and returned to January 2020 growth levels.”
Bottom Line
Real estate brokers, home builders, and industry data all agree that the housing market has surged back to pre-COVID levels, showing growth, strength, and incredible resilience.
Home Sales Hit a Record-Setting Rebound
With a worldwide health crisis that drove a pause in the economy this year, the housing market was greatly impacted. Many have been eagerly awaiting some bright signs of a recovery. Based on the latest Existing Home Sales Report from the National Association of Realtors (NAR), June hit a much-anticipated record-setting rebound to ignite that spark.
According to NAR, home sales jumped 20.7% from May to a seasonally-adjusted annual rate of 4.72 million in June:
“Existing-home sales rebounded at a record pace in June, showing strong signs of a market turnaround after three straight months of sales declines caused by the ongoing pandemic…Each of the four major regions achieved month-over-month growth.”
This significant rebound is a major boost for the housing market and the U.S. economy. According to Lawrence Yun, Chief Economist for NAR, the momentum has the potential to continue on, too:
“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown…This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
With mortgage rates hitting an all-time low, dropping below 3% for the first time last week, potential homebuyers are poised to continue taking advantage of this historic opportunity to buy. This fierce competition among buyers is contributing to home price increases as well, as more buyers are finding themselves in bidding wars in this environment. The report also notes:
“The median existing-home price for all housing types in June was $295,300, up 3.5% from June 2019 ($285,400), as prices rose in every region. June’s national price increase marks 100 straight months of year-over-year gains.”
The graph below shows home price increases by region, powered by low-interest rates, pent-up demand, and a decline in inventory on the market:
Yun also indicates:
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply.”
Bottom Line
Buyers returning to the market are a great sign for the economy, as housing is still leading the way toward recovery. If you’re ready to buy a home this year, let’s connect to make sure you have the best possible guide with you each step of the way.
A Remarkable Recovery for the Housing Market
For months now the vast majority of Americans have been asking the same question: When will the economy turn around? Many experts have been saying the housing market will lead the way to recovery, and today we’re seeing signs of that coming to light. With record-low mortgage rates driving high demand from potential buyers, homes are being purchased at an accelerating pace, and it’s keeping the housing market and the economy moving.
Here’s a look at what a few of the experts have to say about today’s astonishing recovery. In more than one instance, it’s being noted as truly remarkable.
Ali Wolf, Chief Economist, Meyers Research
“The housing recovery has been nothing short of remarkable…The expectation was that housing would be crushed. It was—for about two months—and then it came roaring back.”
“Recent home purchase measures have continued to show remarkable strength, leading us to revise upward our home sales forecast, particularly over the third quarter. Similarly, we bumped up our expectations for home price growth and purchase mortgage originations.”
Javier Vivas, Director of Economic Research for realtor.com
“All-time low mortgage rates and easing job losses have boosted buyer confidence back to pre-pandemic levels.”
James Knightley, Chief International Economist, ING
“At face value this is remarkable given the scale of joblessness in the economy and the ongoing uncertainty relating to the path of Covid-19…The outlook for housing transactions, construction activity and employment in the sector is looking much better than what looked possible just a couple of months ago.”
Bottom Line
The strength of the housing market is a bright spark in the economy and leading the way to what is truly being called a remarkable recovery throughout this country. If you’re thinking of buying or selling a home, maybe this is your year to make a move after all.
What Are Experts Saying about Home Prices?
Last week, a very well-respected real estate analytics firm surprised many with their home price projection for the next twelve months. CoreLogic, in their latest Home Price Index, said:
“The economic downturn that started in March 2020 is predicted to cause a 6.6% drop in the HPI by May 2021, which would be the first decrease in annual home prices in over 9 years.”
The forecast was surprising as it was strikingly different than any other projection by major analysts. Six of the other eight forecasts call for appreciation, and the two who project depreciation indicate it will be one percent or less.
Here is a graph showing all of the projections:
There’s a simple formula to determine the future price of any item: calculate the supply of that item in ratio to the demand for that item. In housing right now, demand far exceeds supply. Last week mortgage applications to buy a home were 33% higher than they were at the same time last year. The available inventory of homes for sale is 31% lower than it was last year. Normally, these numbers should call for homes to continue to appreciate.
Bottom Line
Because of the uncertainty with the pandemic, any economic prediction is extremely difficult. However, looking at the limited supply of homes for sale and the tremendous demand for housing, it is difficult to disagree with the majority of analysts who are calling for price appreciation.
Buyers: Are You Ready for a Bidding War?
With businesses reopening throughout the country and some experts indicating early signs of a much-anticipated economic recovery, more homebuyers are actively entering the housing market this summer. Today, housing is truly driving the U.S. economy forward. With so many buyers looking for homes to purchase and so few houses for sale right now, there’s a disconnect between supply and demand. This imbalance is pushing home prices upward while driving more bidding wars and multiple-offer scenarios. Danielle Hale, Chief Economist at realtor.com explains:
“People are surprised that prices are rising, not falling, because in the last recession home prices fell, the difference this time is the severe shortage of homes for sale…We are seeing bigger price increases with [a limited] number of homes…That is likely to lead to more competition and potentially multiple offers and bidding wars.”
According to the recent Realtors Confidence Index (RCI) survey conducted by the National Association of Realtors (NAR), this trend is growing:
“On average, there were about three offers on a home that closed in May, up from just about two in April 2020 and in May 2019 (2.3 offers).”
HousingWire also indicates:
“42% of homeowners who made a purchase during the January to May time period ended up in a bidding war, demonstrating the strong demand for homes amid low inventory.”
With more people returning to work we’ll continue to see the number of interested buyers increase. So, if you’re among the many people looking for a home to buy this summer, it’s important to ensure you have the right guidance from the start. This way, you make sure your offer stands out from the crowd when it really counts. Here are two tips to follow.
1. Hire a Trusted Local Expert
A trusted local real estate professional matters more than ever right now, as noted in a recent survey shared by NAR. In fact, according to respondents, 54% of buyers and 62% of sellers indicated that “Particularly during the pandemic, a real estate agent’s guidance is especially valued.”
We’re not in a normal market. We are in one of the greatest health crises our nation has ever seen. The pandemic has had a dramatic impact on the journey consumers must take to purchase a home. To successfully navigate the landscape today, you need a true expert on your side.
2. Get Pre-Approved for a Mortgage
When there are more buyers than sellers on the market, the process to find a home becomes much more challenging. One way to show you’re serious about buying a home is to work with a lender to get pre-approved for a mortgage before starting your search. With a pre-approval letter, sellers will see your true desire to buy this year, potentially helping your offer rise to the top.
Bottom Line
If this is the year you’re ready to buy, let’s connect to get the process started so you can make sure your offer is a strong one when the competition heats up.
Latest Unemployment Report: Great News…for the Most Part
The Bureau of Labor Statistics (BLS) released their latest Employment Situation Summary last Thursday, and it again beat analysts’ expectations in a big way. The consensus was for 3,074,000 jobs to be added in June. The report revealed that 4,800,000 jobs were added. The unemployment rate fell to 11.1% from 13.3% last month. Again, excellent news as the unemployment rate fell for the second consecutive month. However, there’s still a long way to go before the economy fully recovers as 17.8 million Americans remain unemployed.
Here are two interesting insights on the report:
What about a supposed misclassification?
The BLS addressed this at length in a blog post last week, and concluded by saying:
“Regardless of the assumptions we might make about misclassification, the trend in the unemployment rate over the period in question is the same; the rate increased in March & April and eased in May.”
They specifically noted the issue in the latest report by explaining that if they adjusted the rate for the potential miscalculation, it would increase from 11.1% to 12.1% (which is lower than the adjusted rate of 16.4% last month). They went on to say:
“However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.”
Does the shutdown of parts of the economy skew the unemployment numbers?
Because the uniqueness of 2020 impacts the employment situation in so many ways, each jobs report is now examined with a microscope to make sure the headlines generated by the report accurately convey what’s happening in the job market.
One such analysis is done by Jed Kolko, Chief Economist at Indeed. He believes the extraordinary number of people in the “temporary” unemployed category confuses the broader issue of how many people have permanently lost their job. He adjusts for this when calculating his “core unemployment rate” (which subtracts temporary layoffs and adds unemployed who didn’t search for a job recently).
The bad news is that his analysis reveals that the number of permanently unemployed is still rising (from 4.6% in April to 5.9% last month). The good news, however, is when you use his methodology to look back at the Great Recession, today’s “core unemployment rate” is significantly lower (5.9% versus 10.5% in April 2010).
Bottom Line
Last week’s jobs report was much better than most expected. However, we should remain cautious in our optimism. As the Wall Street Journal explained in their analysis of the jobs report:
“U.S. job growth surged last month, underscoring the economy’s capacity for a quick rebound if businesses continue to reopen and consumers regain confidence. A recent coronavirus spike, however, could undermine trends captured in the latest jobs report.”
A Historic Rebound for the Housing Market
Pending Home Sales increased by 44.3% in May, registering the highest month-over-month gain in the index since the National Association of Realtors (NAR) started tracking this metric in January 2001. So, what exactly are pending home sales, and why is this rebound so important?
According to NAR, the Pending Home Sales Index (PHS) is:
“A leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two.”
In real estate, pending home sales is a key indicator in determining the strength of the housing market. As mentioned before, it measures how many existing homes went into contract in a specific month. When a buyer goes through the steps to purchase a home, the final one is the closing. On average, that happens about two months after the contract is signed, depending on how fast or slow the process takes in each state.
Why is this rebound important?
With the COVID-19 pandemic and a shutdown of the economy, we saw a steep two-month decline in the number of houses that went into contract. In May, however, that number increased dramatically (See graph below):
This jump means buyers are back in the market and purchasing homes right now. Lawrence Yun, Chief Economist at NAR mentioned:
“This has been a spectacular recovery for contract signings and goes to show the resiliency of American consumers and their evergreen desire for homeownership…This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
But in order to continue with this trend, we need more houses for sale on the market. Yun continues to say:
“More listings are continuously appearing as the economy reopens, helping with inventory choices…Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
As we move through the year, we’ll see an increase in the number of houses being built. This will help combat a small portion of the inventory deficit. The lack of overall inventory, however, is still a challenge, and it is creating an opportunity for homeowners who are ready to sell. As the graph below shows, during the last 12 months, the supply of homes for sale has been decreasing year-over-year and is not keeping up with the demand from homebuyers.
Bottom Line
If you decided not to sell this spring due to the health crisis, maybe it’s time to jump back into the market while buyers are actively looking for homes. Let’s connect today to determine your best move forward.
Are New Homes Going to Be Available to Buy This Year?
In today’s economy, everyone seems to be searching for signs that a recovery is coming soon. Many experts agree that it may actually already be in motion or will be starting by the 3rd quarter of this year. With the housing market positioned to lead the way out of this recession, builder confidence might be a bright spark that gets the recovery fire started. The construction of new homes coming right around the corner is a huge part of that effort, and it may drive your opportunity to make a move this year.
According to the National Association of Home Builders (NAHB):
“New home sales jumped in May, as housing demand was supported by low interest rates, a renewed household focus on housing, and rising demand in lower-density markets. Census and HUD estimated new home sales in May at a 676,000 seasonally adjusted annual pace, a 17% gain over April.”
In addition, builder confidence is also rising, opening up opportunities for newly constructed homes in the market. The NAHB also notes:
“In a sign that housing stands poised to lead a post-pandemic economic recovery, builder confidence in the market for newly-built single-family homes jumped 21 points to 58 in June, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Any reading above 50 indicates a positive market.”
As noted above, this upward trend is supported by builders reporting an increase in demand for single-family homes in suburban neighborhoods with lower-density populations, a result of the COVID-19 health crisis.
Moreover, the most recent Monthly New Residential Construction Report from the U.S. Census indicates that authorized building permits for new residential construction increased by 14.4% month-over-month from April to May, and housing starts were also up 4.3% over the same time period. (See graph below):
Although housing permits and starts are both considerably lower than they were at this time last year, indicating the new construction market is still working on building its way back up, the trends are moving in the right direction when it comes to having an impact on the U.S. economy. They’re also poised to create the much-needed new homes for Americans to purchase in a time when inventory is so scarce.
Dean Mon, Chairman of the NAHB notes:
“As the nation reopens, housing is well-positioned to lead the economy forward…Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”
The gap between homes to buy and the high demand from purchasers may be narrowed by new construction, and the data shows that these homes are on their way into the housing market.
So, if you’ve debated whether or not to sell your house this year because you’re not sure where to move, a newly-built home – designed to your specific liking – may be your answer.
Bottom Line
With new residential construction right around the corner, you can feel confident about selling your house and having a place to move into. Maybe it’s time to finally design the home you’ve always wanted. Let’s connect today to discuss selling your house while demand from eager buyers is high.
Is the Economic Recovery Already Underway?
The Wall Street Journal just released its latest monthly Survey of Economists. In an article on the findings, they reported:
“The U.S. economy will be in recovery by the third quarter of this year, economists said in a survey that also concluded the labor market will fare better than previously expected following the effects of the coronavirus pandemic.”
Clearly, the latest jobs report from the U.S. Bureau of Labor Statistics confirmed the labor market is outperforming expectations, as it revealed that 2.5 million jobs were added. Directly before the release, experts forecasted that we would lose over 8 million jobs.
A second revelation indicating the economy is already about to turn around was also somewhat unexpected. More than 9 out of 10 economists surveyed believe the recovery has already begun this quarter or will begin in the third quarter. Here are the results of the survey question asking when the recovery will begin:
The survey also asked what type of recovery the economists expect.
More than 8 out of 10 believe it will be a form of a ‘V’ recovery:
- A true ‘V’ with a sharp drop and a sharp rebound
- A ‘Nike Swoosh’ with a sharp drop and a more gradual recovery, coined after the company’s logo
Some experts, possibly concerned about a second wave of COVID-19, call for a ‘W’ recovery – a double-dip recession.
Others call for a ‘U’ with a prolonged bottom.
A very small percentage project the dreaded ‘L’ recovery, which is no recovery at all for the foreseeable future (think of the Great Recession).
Here’s the breakdown:
Bottom Line
Though we still have a long and difficult journey ahead, it appears the worst for both the economy and the unemployment situation may be in our rearview mirror.
