As we move into the second half of the year, one thing is clear: the current real estate market is one for the record books. The exact mix of conditions we have today creates opportunities for both buyers and sellers. Here’s a look at four key components that are shaping this unprecedented market.
Earlier this year, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels are starting to trend up. The latest Monthly Housing Market Trends Report from realtor.com says:
“In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.”
This is good news for buyers who crave more options. But even though we’re experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states. That’s why it’s still a sellers’ market, giving homeowners immense leverage when they decide to make a move.
Today’s ongoing low supply, coupled with high demand, creates a market characterized by high buyer competition and bidding wars. Buyers are going above and beyond to make sure their offer stands out from the crowd by offering over the asking price, all cash, or waiving some contingencies. The number of offers on the average house for sale broke records this year – and that’s great news for sellers.
The latest Confidence Index from the National Association of Realtors (NAR) says the average home for sale receives five offers (see graph below):
For buyers, the best way to put a compelling offer together is by working with a local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what’s most appealing to the seller.
The competition among buyers is driving prices up. Over the past year, we’ve seen home price appreciation rise across the country. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices increased 15.4% year-over-year in May:
“The May 2021 HPI gain was up from the May 2020 gain of 4.2% and was the highest year-over-year gain since November 2005. Low mortgage rates and low for-sale inventory drove the increase in home prices.”
Rising home values are a big part of why real estate remains one of the top sought-after investments for Americans. For potential sellers, it also means it’s a great time to list your house to maximize the return on your investment.
The equity in a home doesn’t just grow when a homeowner pays their mortgage – it also grows as the home’s value appreciates. Thanks to the jump in price appreciation, homeowners across the country are seeing record-breaking gains in home equity. CoreLogic recently reported:
“…homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year over year, representing a collective equity gain of over $1.9 trillion, and an average gain of $33,400 per borrower, since the first quarter of 2020.”
That’s a major perk for households to leverage. Homeowners can use that equity to accomplish major life goals or move into their dream homes.
If you’re thinking about buying or selling, there’s no time like the present. Let’s connect to talk about how you can take advantage of the conditions we’re seeing today to meet your homeownership goals.
Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams.
What’s your home’s value?
Contact one of Our Agents today!
Congratulations to Pip Klein as she celebrates 10 years with the Green Team!
When Pip started at the Green Team as a part-time marketing consultant, she had not even considered real estate as a career. But Geoff Green encouraged her because he felt she had the personality, contacts AND most importantly, her late parents’ home was on the market with another broker!!! “Get your license PIP,” she remembers him saying loudly. And so she did – a decision which she is very grateful that she made. In addition, her techie son Ben was in high school at the time and also joined the team, working on redesigning the Green Team website. It was the right time for both Ben and Pip. Plus, it was fun for them to work together during those last years of his high school.
One of Pip’s original sales goals was to earn Captains Club status by reaching the $3 million mark. Pip got her license in May 2011, and she made Captains Club in 2015, 2016, 2017, and 2020. She made Presidents Club (for $5-$10 million in sales) in 2018. In addition, she was the 3rd Quarter Sales Leader for that year. Pip achieved honorable mention (for sales of $1.5 to $3 million) in 2019. She found that once her business was up and running, it became easier to achieve goals. Also, the market improved, providing the opportunity for more sales. She is also very proud of being named the Green Team’s first “Momentum Builder,” a new award in 2015 for achievements and helping inspire others. Pip’s goals have been consistent. Keep learning, growing, and enjoying the work. And, to make at least Captains Club every year!
Pip has found Green Team is truly a great “team” of people. Over her decade there, she has made valuable friendships with both agents and clients. Indeed, friends for life.
Pip Klein, Associate Broker/Manager Lucyann Tinnirello, and Toni Vogel
Pip likes connecting people to the right home. She calls it being a house matchmaker. Once she gets to know people, she can really get a sense of the type of house they want. Pip and her husband Bob bought a unique home 30 years ago. It was a renovated onion barn! She also enjoys writing and hopes to continue with personal blogging about real estate. Pip’s least favorite thing? When transactions become tangled in situations beyond control while everyone is waiting to close. That can be frustrating. Red tape, legal snafus, etc. can be difficult. You have to focus on the endpoint, which is closing.
Pip believes it has been a decade of accomplishments. Sometimes the smaller transactions are big victories as you help people buy or sell and make their next chapter easier to move on to. According to Pip, no one likes transition, and realtors are in the middle of that angst on all sides. They have to be calm and extend the best advice. Communication is key. She did have one memorable day in 2018. Three closings, $2.4 million volume in a day! That was a once-in-a-lifetime tsunami of good luck. What’s more, the commission hit her bank account on her birthday.
But of course, it’s not about the dollars. Truly, for Pip, it’s the culmination of hard work and getting things to the finish line. Her father always said, “Do what you enjoy, then you enjoy what you do.” Sage advice. He didn’t see his “work” as something separate. When you are a Realtor, you are living, breathing real estate all the time. And it doesn’t feel like “work” when you are truly happy with what you are doing.
“Life is an adventure and you have to take risks!” Starting a new career at age 60 was challenge enough, but the best part was that she didn’t realize how much she would learn about herself and others. It really is the type of work that embraces a lot of different aspects of a “job.” Especially because Realtors deal so closely with people, most of whom they don’t know and never met. That keeps it fresh. According to Pip, it was sort of like having a baby in her 40s, which she did. It was a great learning experience and chock full of new friends and experiences. She has no regrets!
One of the biggest lessons that Pip has learned is to accept rejection. Not everything works out in your favor. Sometimes, you just don’t get the listing for whatever reason. Or the deal falls through. Don’t take it personally. Be yourself and carry on.
Pip has had many memorable experiences. One of her favorites is this:
“A family from NY was looking for their dream home/farm property. They had a very specific wish list, but I found 3 homes for them to see. The FIRST house was spectacular and everything they hoped for. The land, the extra house, and all redone – a great Victorian. While racing around the bottom level I noticed a painting on the wall. There was something familiar about it and I went up close to look. Yes, there it was – my mother’s signature – Phyllis Klein. This was a painting I had donated to a fundraiser years before and the owner of this house had purchased it. I turned to my new client and said, “Well, you simply have to buy this house. My mother’s painting is hanging on the wall!” They did!”
With home prices continuing to deliver double-digit increases, some are concerned we’re in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is nothing like 2006 for three major reasons.
Back in 2006, nearly everyone could qualify for a loan. The Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers’ Association is an indicator of the availability of mortgage money. The higher the index, the easier it is to obtain a mortgage. The MCAI more than doubled from 2004 (378) to 2006 (869). Today, the index stands at 130. As an example of the difference between today and 2006, let’s look at the volume of mortgages that originated when a buyer had less than a 620 credit score.
Dr. Frank Nothaft, Chief Economist for CoreLogic, reiterates this point:
“There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent.”
During the housing bubble, as prices skyrocketed, people were refinancing their homes and pulling out large sums of cash. As prices began to fall, that caused many to spiral into a negative equity situation (where their mortgage was higher than the value of the house).
Today, homeowners are letting their equity build. Tappable equity is the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio (thus still leaving them with at least 20% equity). In 2006, that number was $4.6 billion. Today, that number stands at over $8 billion.
Yet, the percentage of cash-out refinances (where the homeowner takes out at least 5% more than their original mortgage amount) is half of what it was in 2006.
FOMO (the Fear Of Missing Out) dominated the housing market leading up to the 2006 housing bubble and drove up buyer demand. Back then, housing supply more than kept up as many homeowners put their houses on the market, as evidenced by the over seven months’ supply of existing housing inventory available for sale in 2006. Today, that number is barely two months.
Builders also overbuilt during the bubble but pulled back significantly over the next decade. Sam Khater, VP and Chief Economist, Economic & Housing Research at Freddie Mac, explains that pullback is the major factor in the lack of available inventory today:
“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”
Here’s a chart that quantifies Khater’s remarks:
Today, there are simply not enough homes to keep up with current demand.
This market is nothing like the run-up to 2006. Bill McBride, the author of the prestigious Calculated Risk blog, predicted the last housing bubble and crash. This is what he has to say about today’s housing market:
“It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low.”
An important factor in today’s market is the number of homes for sale. While inventory levels continue to sit near historic lows, there are indications we may have hit the lowest point we’ll see. Odeta Kushi, Deputy Chief Economist at First American, recently said of our supply challenges:
“It looks like inventory may have hit a bottom (we’ve seen this in the higher frequency data as well). Unsold inventory in May was at 2.5 months supply, up from 2.4.”
To put it into perspective, the graph below shows levels of inventory rising since the beginning of the year:
We’re still not close to a balanced market, which would be a 6 months’ supply of homes for sale. However, we are seeing a slow but steady increase in homes coming up for sale. And that leaves many buyers and sellers wondering the same thing: what does that mean for me?
If you’re a buyer, more inventory coming to market is a welcome sight. More supply means more options and less competition, which could mean fewer bidding wars.
According to the latest Monthly Housing Market Trends Report, supply levels are continuing to increase, which is different from the typical summer market:
“In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.”
If you’re having trouble finding your next home, this news should give you the hope and motivation to keep your buying process moving forward. Experts project mortgage rates will begin increasing, which will make purchasing a home less affordable as time passes. You can still capitalize on today’s low interest rates, so stick with your search as more homes come to market.
If you’ve been putting off selling your house, you shouldn’t wait much longer. The year’s month-over-month gains in homes for sale have helped buyers, but we’re still very much in a sellers’ market.
As the graph below shows, even with the number of homes for sale rising, we’re still well below the supply levels we’ve seen historically:
Of course, more homes are coming to market now, and more are expected in the coming months. Selling your house this summer gives you the chance to get ahead of the competition and maximize your sales potential before more homes are put up for sale in your neighborhood.
More homes for sale means more options for buyers and more competition for sellers. Whether you’re looking to buy or sell, let’s connect today to discuss your options and why it’s still a good time to make your move.
Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams.
What’s your home’s value?
Contact one of Our Agents today!
In real estate, it’s normal to see ebbs and flows in the market. Typically, the summer months are slower-paced than the traditionally busy spring. But this isn’t a typical summer. As the economy rebounds and life is returning to normal, the real estate market is expected to have an unusually strong summer season.
Here’s how this summer is stacking up against the norm and what it means for you.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), inventory levels have been rising since February of this year. Looking at the graph below, there’s a clear upward trend, as shown in the green bars. Currently, there’s roughly a 2.5 months’ supply of homes for sale. And while inventory is trending up as more houses are coming to the market, it’s still much lower than several of the previous summers, as the orange bars indicate.
If you’re looking to buy, some relief is on the way in the form of more homes coming to the market. Just remember, we still have less inventory than the norm, so be patient in your search.
If you’re thinking of selling, now is the time. Work with your agent to list your house before it has more competition on the market.
Unlike the typical summer trend, time on the market is moving at the fastest speed we’ve seen since NAR started collecting this survey-based information in 2011. The most recent Realtors Confidence Index shows that the average home is on the market for just 17 days, as shown in green in the graph below. This means houses are selling at a much faster pace than a typical summer, which the orange bars represent.
If you’re looking to buy, this means you need to be prepared to move fast. Brace for a quick pace and rely on your agent to stay in the know on the available homes in your area.
If you’re thinking of selling, data shows your house will likely sell quickly. If you’re worried about where you’ll go once your house sells, consider a newly built home as a good way to move up.
The last big factor making this an unusually strong market this summer is home price appreciation. According to the State House Price Index from the Federal Housing Finance Agency (FHFA), we’re currently experiencing double-digit house price appreciation and have an average of 12.6% appreciation across the country. The graph below uses data from NAR to show a more granular view of how prices have changed month-to-month over the past few years. The green bars show the current price appreciation we’re experiencing today. Our current levels are well above what we’ve seen in recent summers, shown by the orange bars.
If you’re looking to buy, competition and bidding wars are driving prices up. Getting pre-approved can show the seller you’re serious and help you know what you can afford. Once you do, work with your agent to make a strong offer that stands out.
If you’re thinking of selling, seize this opportunity to use your additional equity from this price appreciation to power your next move.
This isn’t a typical summer. Whether you’re buying or selling, let’s connect to talk about how you can capitalize on today’s market conditions to sell your house or find your dream home.
Contact one of Our Agents today!
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Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams.
What’s your home’s value?
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