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What Do Supply and Demand Tell Us About Today’s Housing Market?

Monday, October 11, 2021

by Christie Cannon

What Do Supply and Demand Tell Us About Today’s Housing Market?

There’s a well-known economic theory – the law of supply and demand – that explains what’s happening with prices in the current real estate market. Put simply, when demand for an item is high, prices rise. When the supply of the item increases, prices fall. Of course, when demand is very high and supply is very low, prices can rise significantly.

Understanding the impact both supply and demand have can provide the answers to a few popular questions about today’s housing market:

Why are prices rising?
Where are prices headed?
What does this mean for homebuyers?

Why Are Prices Rising?

According to the latest Home Price Insights report from CoreLogic, home prices have risen 18.1% since this time last year. But what’s driving the increase?

Recent buyer and seller activity data from the National Association of Realtors (NAR) helps answer that question. When we take NAR’s buyer activity data and compare it to the seller traffic during the same timeframe, we can see buyer demand continues to outpace seller activity by a wide margin. In other words, the demand for homes is significantly greater than the current supply that’s available to buy (see maps below):This combination of low supply and high demand is what’s driving home prices up. Bill McBride, author of the Calculated Risk blog, puts it best, saying:

“By some measures, house prices seem high, but the recent price increases make sense from a supply and demand perspective.”

Where Are Prices Headed?

The supply of homes for sale will greatly affect where prices head over the coming months. Many experts forecast prices will continue to increase, but they’ll likely appreciate at a slower rate.

Buyers hoping to purchase the home of their dreams may see this as welcome news. In this case, perspective is important: a slight moderation of home prices does not mean prices will depreciate or fall. Price increases may occur at a slower pace, but experts still expect them to rise.

Five major entities that closely follow the real estate market forecast home prices will continue appreciating through 2022 (see graph below):

What Does This Mean for Homebuyers?

If you’re waiting to enter the market because you’re expecting prices to drop, you may end up paying more in the long run. Even if price increases occur at a slower rate next year, prices are still projected to rise. That means the home of your dreams will likely cost even more in 2022.

Bottom Line

The truth is, high demand and low supply are what’s driving up home prices in today’s housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise. If you’re a potential homebuyer, let’s connect today to discuss what that could mean for you if you wait even longer to buy.

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The Truths Young Homebuyers Need To Hear

Friday, July 9, 2021

by Christie Cannon

The Truths Young Homebuyers Need To Hear

For many young or first-time homebuyers, purchasing a home can feel intimidating. A recent survey shows some homebuyers ages 25 to 40 may be unsure about the homebuying process and what they can afford. It found:

“1 in 4 underestimated their buying potential by $150k or more”
“1 in 4 underestimated the increase in value by $100k or more”
“47% don’t know what a good interest rate is”

Because they feel uncertain, many young homebuyers have given up on their search, or worse, they’ve decided homebuying isn’t for them and never started on their journey to begin with.

If you’re interested in buying but aren’t sure where to begin, here are three key concepts about homeownership you should understand before you get started.

1. What You Need To Know About Down Payments

Saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As Freddie Mac says:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

According to the most recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR), the median down payment for homes purchased between July 2019 and June 2020 was only 12%. That number is even lower when we control for age – for buyers in the 22 to 30 age range, the median down payment was only 6%.

2. You May Be Able To Afford More Home Than You Think

Working remotely, exercising, and generally spending more time than ever in our homes has changed what many people are looking for in their living space. However, some young homebuyers don’t feel they can afford a home that suits their growing needs and have decided to continue renting instead. That means they’ll miss out on some of the long-term benefits of owning a home. As an article recently published by NAR points out:

“Many young adults are underestimating how much they need for homeownership, the survey finds. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years...”

Knowing how much home you can afford when starting the buying process is critical and could be the game-changer that gets you from renting to buying.

3. Homeownership Will Become Less Affordable the Longer You Wait

Finally, with mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later. Sam Khater, Chief Economist at Freddie Mac, notes:

“As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. If you’ve been on the fence about buying a home, there’s no time like the present.

Bottom Line

If you feel overwhelmed by the prospect of starting your home search, you’re not alone. Let’s connect today so we can talk more about the process, what you’ll need to start your search, and what to expect.

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Buyer & Seller Perks in Today’s Housing Market

Friday, March 26, 2021

by Christie Cannon

Buyer & Seller Perks in Today’s Housing Market

Right now, the housing market is full of outstanding opportunities for both buyers and sellers. Whether you’re thinking of buying your first home, moving up to a bigger one, or selling so you can downsize this spring, there are perks today that are powering big moves for people across the country. Here are the top two to keep on the radar this season.

The Biggest Perk for Buyers: Low Mortgage Rates

Today’s most compelling buyer incentive is low mortgage interest rates. The 30-year fixed-rate is now averaging just over 3%. While that’s slightly higher than the record-lows from 2020 and earlier this year, it’s still way lower than historic norms, making purchasing a home an ongoing perk for hopeful buyers (See graph below):This is a huge advantage for buyers and helps to make owning a home attainable for more households – and there’s good reason to strive for homeownership. The latest Homeowner Equity Report from CoreLogic shows how homeowners saw major gains in their net worth last year, all thanks to owning a home. Frank Martell, President and CEO of CoreLogic, explains:

“Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership. This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”

Low mortgage rates are a plus for buyers right now, but experts forecast we’ll see them continue to rise as the year goes on. If you’re ready to purchase a home, it’s wise to get started on the process soon so you can secure today’s comparatively low rate.

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, and it’s creating a serious sellers’ market. According to Danielle Hale, Chief Economist at realtor.com:

“Total active inventory continues to decline, dropping 50 percent. With buyers active in the market and sellers still slow to put homes up for sale, homes are selling quickly and the total number actively available for sale at any point in time continues to decline.” (See map below):

The lack of houses for sale continues to challenge the market, and with low mortgage rates fueling buyer demand, homes are hard for buyers to find today. According to the latest Realtors Confidence Index Survey by the National Association of Realtors (NAR), the average house is now receiving 4.1 offers and is on the market for only 20 days.

Buyers are clearly eager to purchase, and because of the shortage of inventory available, they’re often entering bidding wars. This is one of the factors keeping home prices strong and giving sellers leverage in the negotiation process.

Homeowners who are in a position to sell shouldn’t wait to make their move. There’s a light at the end of the tunnel for today’s inventory shortage, so listing this spring will get your house on the market when conditions are most favorable. With low inventory and high buyer demand, homeowners can potentially earn a greater profit on their houses and sell them quickly in the fast-paced spring market.

Bottom Line

Whether you’re thinking about buying or selling a home, there are major perks available in today’s housing market. Let’s connect today to discuss how these favorable conditions play to your advantage in our local area.

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What Do Supply and Demand Tell Us About Today’s Housing Market?