Some Highlights from Multigenerational Housing Is Gaining Momentum
If your house is feeling a little cramped with the addition of adult children or aging parents, it might be time to consider a move-up into a multigenerational home that better suits your changing needs.
With benefits that include a combined homebuying budget and shared caregiving duties, an increasing number of households are discovering the value of a multigenerational home.
With such high demand for houses today, now is a great time to sell so you can upgrade to a multigenerational home that may better suit your evolving needs.
The Green Team Realty March 2021 Housing Market Update was held on March 16 at 12:00 p.m. If you missed the live webinar or would like to watch it again, it’s available here:
Overview of the real estate market on the national level
Geoff Green, President of Green Team Realty, began the update with a quote from Lawrence Yun, Chief Economist at NAR:
“Home sales could possibly reach 8 million if we had more inventory… Mortgage rates should remain very low throughout 2021, although we may have seen the lowest already.”
As shown in this graphic, foreclosure activity is minimal.
Geoff pointed out that with the job loss and economic woes resulting from the pandemic, you would expect the number of foreclosures to be much higher. According to DS News,
“About 325,000 people will exit the forbearance program over the next six to nine months without a plan in place. Some – but probably not all – of those loans will likely default.”
The continuing saga of low inventory – and the Sellers Market
Year-over-year changes indicate that this is a great time to sell. Inventory is so low, if you are thinking about getting your house on the market, now is the time to do it!
Home Price Appreciation
For an in-depth discussion on home price appreciation, watch the housing market update here.
National and Local Housing Market Stats (Orange County NY and Sussex County NJ) are then discussed.
Meet our Panel
Geoff was joined by Keren Gonenof Green Team New Jersey Realty and Carol Buchanan of Green Team New York Realty. In addition, Ken Aulicino of Family First Funding added his expertise as a Mortgage Specialist.
The discussion began with the topic of buyers and possible issues in obtaining mortgages. In addition, whether appraisals were coming in, even with rising home prices. Geoff asked Ken Aulicino about whether rates were coming up. Even with rates coming up, historically they are still very low. Click here to watch the full panel discussion, including a question and answer session.
If you would like to get in touch with any of our panelists, their contact information is below:
We’ll see you on Tuesday, April 20 at 12 p.m. for our next Housing Market Update.
Home values appreciated by about ten percent in 2020, and they’re forecast to appreciate by about five percent this year. This has some voicing concern that we may be in another housing bubble like the one we experienced a little over a decade ago. Here are three reasons why this market is totally different.
1. This time, housing supply is extremely limited
The price of any market item is determined by supply and demand. If supply is high and demand is low, prices normally decrease. If supply is low and demand is high, prices naturally increase.
In real estate, supply and demand are measured in “months’ supply of inventory,” which is based on the number of current homes for sale compared to the number of buyers in the market. The normal months’ supply of inventory for the market is about 6 months. Anything above that defines a buyers’ market, indicating prices will soften. Anything below that defines a sellers’ market in which prices normally appreciate.
Between 2006 and 2008, the months’ supply of inventory increased from just over 5 months to 11 months. The months’ supply was over 7 months in twenty-seven of those thirty-six months, yet home values continued to rise.
Months’ inventory has been under 5 months for the last 3 years, under 4 for thirteen of the last fourteen months, under 3 for the last six months, and currently stands at 1.9 months – a historic low.
Remember, if supply is low and demand is high, prices naturally increase.
2. This time, housing demand is real
During the housing boom in the mid-2000s, there was what Robert Schiller, a fellow at the Yale School of Management’s International Center for Finance, called “irrational exuberance.” The definition of the term is, “unfounded market optimism that lacks a real foundation of fundamental valuation, but instead rests on psychological factors.” Without considering historic market trends, people got caught up in the frenzy and bought houses based on an unrealistic belief that housing values would continue to escalate.
The mortgage industry fed into this craziness by making mortgage money available to just about anyone, as shown in the Mortgage Credit Availability Index (MCAI) published by the Mortgage Bankers Association. The higher the index, the easier it is to get a mortgage; the lower the index, the more difficult it is to obtain one. Prior to the housing boom, the index stood just below 400. In 2006, the index hit an all-time high of over 868. Again, just about anyone could get a mortgage. Today, the index stands at 122.5, which is well below even the pre-boom level.
In the current real estate market, demand is real, not fabricated. Millennials, the largest generation in the country, have come of age to marry and have children, which are two major drivers for homeownership. The health crisis is also challenging every household to redefine the meaning of “home” and to re-evaluate whether their current home meets that new definition. This desire to own, coupled with historically low mortgage rates, makes purchasing a home today a strong, sound financial decision. Therefore, today’s demand is very real.
Remember, if supply is low and demand is high, prices naturally increase.
3. This time, households have plenty of equity
Again, during the housing boom, it wasn’t just purchasers who got caught up in the frenzy. Existing homeowners started using their homes like ATM machines. There was a wave of cash-out refinances, which enabled homeowners to leverage the equity in their homes. From 2005 through 2007, Americans pulled out $824 billion dollars in equity. That left many homeowners with little or no equity in their homes at a critical time. As prices began to drop, some homeowners found themselves in a negative equity situation where the mortgage was higher than the value of their home. Many defaulted on their payments, which led to an avalanche of foreclosures.
Today, the banks and the American people have shown they learned a valuable lesson from the housing crisis a little over a decade ago. Cash-out refinance volume over the last three years was less than a third of what it was compared to the 3 years leading up to the crash.
This conservative approach has created levels of equity never seen before. According to Census Bureaudata, over 38% of owner-occupied housing units are owned ‘free and clear’ (without any mortgage). Also, ATTOM Data Solutions just released their fourth quarter 2020 U.S. Home Equity Report, which revealed:
“17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value…The count of equity-rich properties in the fourth quarter of 2020 represented 30.2 percent, or about one in three, of the 59 million mortgaged homes in the United States.”
If we combine the 38% of homes that are owned free and clear with the 18.7% of all homes that have at least 50% equity (30.2% of the remaining 62% with a mortgage), we realize that 56.7% of all homes in this country have a minimum of 50% equity. That’s significantly better than the equity situation in 2008.
This time, housing supply is at a historic low. Demand is real and rightly motivated. Even if there were to be a drop in prices, homeowners have enough equity to be able to weather a dip in home values. This is nothing like 2008. In fact, it’s the exact opposite.
In today’s housing market, it seems harder than ever to find a home to buy. Before the health crisis hit us a year ago, there was already a shortage of homes for sale. When many homeowners delayed their plans to sell at the same time that more buyers aimed to take advantage of record-low mortgage rates and purchase a home, housing inventory dropped even further. Experts consider this to be the biggest challenge facing an otherwise hot market while buyers continue to compete for homes. As Danielle Hale, Chief Economist at realtor.com, explains:
“With buyers active in the market and seller participation lagging, homes are selling quickly andthe total number available for sale at any point in time continues to drop lower. In January as a whole, the number of for sale homes dropped below 600,000.”
Every month, realtor.com releases new data showing the year-over-year change in inventory of existing homes for sale. As you can see in the map below, nationwide, inventory is 42.6% lower than it was at this time last year:
Does this mean houses aren’t being put on the market for sale?
Not exactly. While there are fewer existing homes being listed right now, many homes are simply selling faster than they’re being counted as current inventory. The market is that competitive! It’s like when everyone was trying to find toilet paper to buy last spring and it was flying off the shelves faster than it could be stocked in the stores. That’s what’s happening in the housing market: homes are being listed for sale, but not at a rate that can keep up with heavy demand from competitive buyers.
In the same realtor.com report, Hale explains:
“Time on the market was 10 days faster than last year meaning that buyers still have to make decisions quickly in order to be successful. Today’s buyers have many tools to help them do that, including the ability to be notified as soon as homes meeting their search criteria hit the market. By tailoring search and notifications to the homes that are a solid match, buyers can act quickly and compete successfully in this faster-paced housing market.”
The Good News for Homeowners
The health crisis has been a major reason why potential sellers have held off this long, but as vaccines become more widely available, homeowners will start making their moves. Ali Wolf, Chief Economist at Zonda, confirms:
“Some people will feel comfortable listing their home during the first half of 2021. Others will want to wait until the vaccines are widely distributed.”
With more homeowners getting ready to sell later this year, putting your house on the market sooner rather than later is the best way to make sure your listing shines brighter than the rest.
When you’re ready to sell your house, you’ll likely want it to sell as quickly as possible, for the best price, and with little to no hassle. If you’re looking for these selling conditions, you’ll find them in today’s market. When demand is high and inventory is low, sellers have the ability to create optimal terms and timelines for the sale, making now an exceptional time to move.
Today’s housing market is a big win for sellers, but these conditions won’t last forever. If you’re in a position to sell your house now, you may not want to wait for your neighbors to do the same. Let’s connect to discuss how to sell your house safely so you’re able to benefit from today’s high demand and low inventory.
Geoff Green, President of Green Team Realty, welcomed everyone to the February 2021 Housing Market Update. The webinar, held on February 16 at 12 p.m.. examined the housing market on both national and local levels.
If you missed the webinar or would like to view it again, it is available here.
“Existing home sales totaled 5.64 million in 2020, up from 5.6% from 2019 and the most since before the Great Recession.” – NAR
“Home seller profits skyrocketed in 2020. Seller profit on typical sale in 2020: $68,843. Up from $53,700 in 2019 and $48,500 in 2018.” – Atom Data
As Geoff has pointed out throughout 2020, sellers were the ones benefitting from that market. The amount of money made by sellers in 2020 was historic. Furthermore, price projections for 2021 signal an average of 5%. Historically, the housing market appreciates by approximately 3.8%.
Low mortgage rates have been driving the sustained market and affordability. The projections are showing that rates will start to climb from 2021 into 2022. However, the increases are not major. Predictions are a gradual increase to 3.2%.
Inventory at a historical low point
“Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago (1.39 million). Unsold inventory sits at an all-time low 1.9-month supply at the current sales pace, down from 2.3 months in November and down from the 3.0-month figure recorded in December 2019. NAR first began tracking the single-family home supply in 1982.” – NAR
Working from home
According to this 2020 Panel Consensus Forecast from NAR, there is a shift towards working from home since 2019. While down from 2020, the forecasts for 2021 and 2022 are at least twice as much as 2019. Geoff sees a restructuring of business models as employees and businesses see benefits of working from home.
What else are we talking about?
We’re talking about the price of lumber and new home sales activity. Also, exiting forbearance plans, housing affordability, and equity benefit of price appreciation
All of these topics are discussed in the February 2021 Housing Market Update.
Housing Market stats on national and local levels
Existing home sales and prices were up, with inventory way down, making for a true supply and demand marketplace.
Hear from our Panelists
Finally, the realtors, all from Green Team New Jersey Realty this month, and Michael Giannetto of Cross Country Mortgage, discussed what they are seeing “on the ground.”
Again, if you missed the webinar, you can watch it now to hear the panel discussion. Just click here. And below is the contact information for this month’s panelists.