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Homes Are More Affordable Right Now Than They Have Been in Years
Today, home prices are appreciating. When we hear prices are going up, it’s normal to think a home will cost more as the trend continues. The way the housing market is positioned today, however, low mortgage rates are actually making homes more affordable, even as prices rise. Here’s why.
According to the Mortgage Monitor Report from Black Knight:
“While home prices have risen for 97 consecutive months, July’s record-low mortgage rates have made purchasing the average-priced home the most affordable it’s been since 2016.”
How is that possible?
Black Knight continues to explain:
“As of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from 1995-2003.
This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6% from the same time last year, despite the average home increasing in value by more than $12,000 during that same time period.
In fact, buying power is now up 10% year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year, while keeping their monthly payment the same.”
This is great news for the many buyers who were unable to purchase last year, or earlier in the spring due to the slowdown from the pandemic. By waiting a little longer, they can now afford 10% more home than they could have a year ago while keeping their monthly mortgage payment unchanged.
With mortgage rates hitting all-time lows eight times this year, it’s now less expensive to borrow money, making homes significantly more affordable over the lifetime of your loan. Mark Fleming, Chief Economist at First American, shares what low mortgage rates mean for affordability:
“In July, house-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”
The map below shows the last time homes were this affordable by state:
In six states – Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia – homes have not been this affordable in more than 25 years.
Bottom Line
If you’re thinking of making a move, now is a great time to take advantage of the affordability that comes with such low mortgage rates. Whether you’re thinking of purchasing your first home or moving into a new one and securing a significantly lower mortgage rate than you may have on your current house, let’s connect today to determine your next steps in the process.
Current Buyer & Seller Perks in the Housing Market
Today’s housing market is making a truly impressive turnaround, and it’s also setting up some outstanding opportunities for buyers and sellers. Whether you’re thinking of buying or selling a home this year, there are perks today that are rarely available, and definitely worth looking into. Here are the top two.
The Biggest Perk for Buyers: Low Mortgage Rates
The most impressive buyer incentive today is the average mortgage interest rate. Just last week, mortgage rates hit an all-time low for the eighth time this year. The 30-year fixed-rate is now averaging 2.88%, the lowest rate in the survey’s history, which dates back to 1971 (See graph below):
This is a huge advantage for buyers. To put it in perspective, it means that today you can get a lower rate than any of the past two generations of homebuyers in your family if you decide to purchase at this time.
In addition, the National Mortgage News notes how today’s buyers have increasing purchasing power due to these low mortgage rates:
“Purchasing power rose 10% year-over-year…With interest rates hitting record lows, buyers were able to afford $32,000 “more house” as of July 23 than they could the year before with the same monthly payment.”
This is a great perk for buyers who are hoping to potentially get more for their money in a home, something many are considering today as they re-evaluate the amount of space they ideally need for their families. It is an opportunity not seen in 50 years, and one not to be missed if the time is right for you to buy a home.
The Biggest Perk for Sellers: Low Inventory
Today, there are simply not enough houses on the market for the number of buyers looking to purchase them. According to the National Association of Realtors (NAR):
“Total housing inventory at the end of June totaled 1.57 million units, up 1.3% from May, but still down 18.2% from one year ago (1.92 million).”
The red bars in the graph below indicate that the inventory of homes coming into the market continues to decline. It was low as we entered the pandemic and has reduced even further this year. Houses today are selling faster than they’re being listed, and that’s creating an even greater supply shortage (See graph below): 
The lack of inventory has been a challenging situation for a while now, and with low mortgage rates fueling buyer demand, inventory is even harder for buyers to find today. Buyers are eager to purchase, and because of the shortage of homes available, they’re encountering more bidding wars. This is one of the factors keeping home prices strong, an advantage for sellers. Lawrence Yun, Chief Economist for NAR notes that this trend may continue, too:
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply.”
With low inventory and high buyer demand, homeowners can potentially earn an increasing profit on their houses and sell them quickly in this sizzling summer market.
Bottom Line
Whether you’re thinking about buying or selling at home, there are some key perks available right now. Let’s connect today to discuss how they may play to your advantage in our local market.
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.
Experts Weigh-In on the Remarkable Strength of the Housing Market
America has faced its share of challenges in 2020. A once-in-a-lifetime pandemic, a financial crisis leaving millions still unemployed, and an upcoming presidential election that may prove to be one of the most contentious in our nation’s history all continue to test this country in unimaginable ways.
Even with all of that uncertainty, the residential real estate market continues to show great resilience. Here’s a look at what the experts have said about the housing market over the past few weeks.
Ivy Zelman, CEO of Zelman & Associates:
“Whether in terms of pending contract activity or our proprietary buyer demand ratings, the various measures of demand captured in this month’s survey can only be described as shockingly strong, in spite of the resurgence in COVID-19 cases.”
Logan Mohtashami, Lead Housing Analyst at HousingWire:
“Existing home sales are still down year over year by 11.3%, but as crazy as this might sound, we have a shot at getting positive year-over-year growth…We may see an existing home sales print of 5,510,000 in 2020.”
Matthew Speakman, Zillow Economist:
“In a remarkable show of resilience, the housing market has stared the pandemic right in the eye and hasn’t blinked.”
Todd Teta, Chief Product Officer for ATTOM Data Solutions:
“The housing market across the United States pulled something of a high-wire act in the second quarter, surging forward despite the encroaching economic headwinds resulting from the Coronavirus pandemic.”
Ali Wolf, Chief Economist of 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.”
Clare Trapasso, Senior News Editor of realtor.com:
“Despite the crippling and ongoing coronavirus pandemic, millions out of work, a recession, a national reckoning over systemic racism, and a highly contentious presidential election just around the corner, the residential real estate market is staging an astonishing rebound.”
Bill Banfield, EVP of Capital Markets at Quicken Loans:
“The pandemic has not stopped the consistent home price growth we have witnessed in recent years.”
Economic & Strategic Research Group at Fannie Mae:
“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.”
Mark Fleming, Chief Economist at First American:
“It seems hard to deny that when one looks at many of the housing market statistics, a “V” shape is quite apparent.”
Bottom Line
The experts seem to agree that residential real estate is doing remarkably well. If you’re thinking of jumping into the housing market (whether buying or selling), this may be the perfect time.
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.
Thinking of Selling Your House? Now May be the Right Time
Inventory is arguably the biggest challenge for buyers in today’s housing market. There are simply more buyers actively looking for homes to purchase than there are sellers selling them, so the scale is tipped in favor of the sellers.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), total housing inventory is down 18.8% from one year ago. Inventory is well below what was available last year, and the houses that do come to the market are selling very quickly.
Sam Khater, Chief Economist at Freddie Mac notes:
“Simply put, new housing supply is not keeping up with rising demand. We estimate that the housing market is undersupplied by 3.3 million units, and the shortage is rising by about 300,000 units a year. More than half of all states have a housing shortage.”
Why is inventory so low?
There are many reasons why it’s hard to find a home to buy today, stemming from an undersupply of newly constructed homes to sellers pressing pause on their moving plans due to the current health pandemic. One of the key factors making it even more challenging, however, is the amount of time current homeowners are staying in their homes. There has truly been a fundamental shift in the market that started about 10 years ago: people are staying put longer, and it’s contributing to the shortage of houses for sale.
In the 2019 Profile of Home Buyers and Sellers, NAR explained:
“In 2019, the median tenure for sellers was 10 years…After 2008, the median tenure in the home began to increase by one year each year. By 2011, the median tenure reached nine years, where it remained for three consecutive years, and jumped up again in 2014 to 10 years.”
As shown in the graph below, historical data indicates that staying in a home for 5-7 years used to be the norm, until the housing bubble burst. Since 2010, that length of time has trended upward, toward 9-10 years, largely due to homeowners aiming to recoup their equity:
Thankfully, with the strength the market has gained over the last 10 years, today’s homeowners are in a much better equity position. Now is a fantastic time for homeowners who are ready to make a move to break the 10-year trend and sell their houses, especially while buyer demand is so high and inventory is so low. It’s a prime time to sell.
In addition, with today’s historically low-interest rates, there’s an opportunity for sellers to maintain a low monthly payment while getting more house for their money. Think move-up opportunity, more square footage, or finding the features they’re really looking for rather than doing costly renovations. With more new homes poised to enter the market this year, homeowners ready to make a move may have a golden opportunity to do so right now.
Bottom Line
There are simply not enough houses for sale today. If you’re ready to leverage your equity and sell your house, let’s connect today. It’s a great time to move while the demand for homes to buy is extremely high.
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.
Not All Agents Are Created Equal
In today’s fast-paced world where answers are just a Google search away, there are some who may question the benefits of hiring a real estate professional when selling a house. The reality is, the addition of more information can lead to more confusion. A real estate agent can be your essential guide, but truth be told, not all agents are created equal. Finding the right agent for you and your family should be your top priority when you’re ready to sell your house.
The right agent is the person who can truly walk you through the whole process, look out for your best interest, and seamlessly lead you through all the steps along the way. In today’s complex market, the way we execute real estate transactions is changing constantly, especially as more elements can be done virtually. Making sure you have the best advice on your side is more important than ever.
So, how do you choose the perfect agent?
It starts with trust. You must trust the advice this person is going to give you, and you’ll want to begin by making sure you’re connected to a true professional. An agent can’t give you perfect advice because it’s impossible to know exactly what’s going to happen at every turn – especially in this unique market. A true professional agent can, however, give you the best advice possible based on the information and situation at hand, helping you make the necessary adjustments and best decisions along the way. The right agent – the professional – will get you the best offer available. That’s exactly what you want and deserve.
What do you need to trust your agent to do?
1. Navigate the Process
There are over 230 possible steps that take place during a successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to ensure you have a positive selling experience?
2. Negotiate on Your Behalf
Today, hiring a trusted and talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step – from the buyer submitting an original offer, to the possible renegotiation of that offer after a home inspection, to the potential cancelation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.
3. Price Your House Competitively
There’s so much information in the news and on the Internet about home sales, prices, and mortgage rates. How do you know what’s going on in our local area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process?
Dave Ramsey, known as 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 a trusted professional who has a finger on the pulse of the market and is eager to help you learn will make your experience an informed and educated one. You need someone who’s going to tell you the truth, not just what they think you want to hear.
Bottom Line
Today’s real estate market is highly competitive. Having a trusted professional who’s been there before to guide you through the process is a simple step that will give you a huge advantage when you’re ready to sell your house. Let’s make it happen together.
Is the Health Crisis Driving Buyers Out of Urban Areas?
The pandemic has caused consumers to re-examine the components that make up the “perfect home.” Many families are no longer comfortable with the locations and layouts of their existing homes. The allure of city life (more congested) seems to be giving way to either suburban or rural life (less congested). The fascination with an open floor plan seems to be fading as people are finding a need for more privacy while working from home.
Recently, news.com released a report that revealed how buyers’ views of listings are leaning heavily to more suburban and rural properties. Here are the year-over-year percentage increases in views per property type:
- Urban – 7%
- Suburban – 13%
- Rural – 16%
In the report, Javier Vivas, Director of Economic Research for realtor.com, gives these numbers some context:
“This migration to the suburbs is not a new trend, but it has become more pronounced. After several months of shelter-in-place orders, the desire to have more space and the potential for more people to work remotely are likely two of the factors contributing to the popularity of the burbs.”
Realtor Magazine also just reported that the desire to move is strongest in our city markets:
“Nearly 30% of respondents living in a high-density urban area say that the pandemic is prompting them to want to move by the end of the year…This is more than double the rate of those living in rural parts of the country, where residents are much more likely to stay put rather than to relocate.”
New Construction Also Seeing a Surge in Views
Since the pandemic has altered how consumers think about floor plans, builders are anticipating how future homes will change. In a recent press release by Zillow, it was explained that:
- Builders believe as people spend more time at home during the pandemic, buyers are realizing which features of their homes are working and not working.
- Homebuilders predict open-concept floor plans will be a thing of the past, as people now value more walls, doors, and overall privacy.
- New construction, which offers the chance to personalize home features, saw its listing page views grow by 73% over last May.
The Virus is Even Impacting the Luxury Second-Home Market
It appears that COVID-19 is impacting the luxury market too. In an article released last week titled, Luxury Buyers Return to Market in Force, Danielle Hale, Chief Economist for realtor.com reported:
“Stay at home orders and social distancing have put a new value on the extra space. We’re seeing this in the luxury market as well, which could mean there is renewed interest from high-end buyers to find a second-home that is within driving distance from their primary residence.
Much like the suburbs are gaining favor with home shoppers, second home markets are seeing increased interest from luxury buyers…Views of luxury properties accelerated 56% in The Hamptons, 28% in Palm Springs and 24% in Greenwich compared to January trends.”
Bottom Line
It appears that a percentage of people are preparing to leave many American cities. Some of these moves will be permanent, while others will be temporary (such as a getaway to a second home). In either case, many consumers are on the move. Real estate professionals are ready and willing to help in any way they can.
