What Every Seller Should Know About Home Prices

      If you’re trying to decide whether or not to sell your house, recent headlines about home prices may be top of mind. And if those stories have you wondering what that means for your home’s value, here’s what you really need to know. What’s Really Happening with Home Prices? It’s possible you’ve seen news stories mentioning a drop in home values or home price depreciation, but it’s important to remember those headlines are designed to make a big impression in just a few words. But what headlines aren’t always great at is painting the full picture. While home prices are down slightly month-over-month in some markets, it’s also true that home values are up nationally on a year-over-year basis. The graph below uses the latest data from S&P Case-Shiller to help tell the story of what’s actually happening in the housing market today: As the graph shows, it’s true home price growth has moderated in recent months (shown in green) as buyer demand has pulled back in response to higher mortgage rates. This is what the headlines are drawing attention to today. But what’s important to notice is the bigger, longer-term picture. While home price growth is moderating month-over-month, the percent of appreciation year-over-year is still well above the home price change we saw during more normal years in the market. The bars for January 2019 through mid-2020 show home price appreciation around 3-4% a year was more typical (see bars for January 2019 through mid-2020). But even the latest data for this year shows prices have still climbed by roughly 10% over last year. What Does This Mean for Your Home’s Equity? While you may not be able to capitalize on the 20% appreciation we saw in early 2022, in most markets your home’s value, on average, is up 10% over last year – and a 10% gain is still dramatic compared to a more normal level of appreciation (3-4%). The big takeaway? Don’t let the headlines get in the way of your plans to sell. Over the past two years alone, you’ve likely gained a substantial amount of equity in your home as home prices climbed. Even though home price moderation will vary by market moving forward, you can still use the boost your equity got to help power your move. As Mark Fleming, Chief Economist at First American, says: “Potential home sellers gained significant amounts of equity over the pandemic, so even as affordability-constrained buyer demand spurs price declines in some markets, potential sellers are unlikely to lose all that they have gained.” Bottom Line If you have questions about home prices or how much equity you have in your current home, let’s connect so you have an expert’s advice.

3 Graphs Showing Why Today's Housing Market Isn't Like 2008

      With all the headlines and talk in the media about the shift in the housing market, you might be thinking this is a housing bubble. It’s only natural for those thoughts to creep in that make you think it could be a repeat of what took place in 2008. But the good news is, there’s concrete data to show why this is nothing like the last time. There’s Still a Shortage of Homes on the Market Today, Not a Surplus For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to almost 15 years of underbuilding homes. The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just a 3.2-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines. Mortgage Standards Were Much More Relaxed Back Then During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Back then, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from mortgage companies. The graph below uses Mortgage Credit Availability Index (MCAI) data from the Mortgage Bankers Association (MBA) to help tell this story. In that index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is. In the latest report, the index fell by 5.4%, indicating standards are tightening. This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards over the past 14 years have helped prevent a scenario that would lead to a wave of foreclosures like the last time. The Foreclosure Volume Is Nothing Like It Was During the Crash Another difference is the number of homeowners that were facing foreclosure after the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM Data Solutions to help paint the picture of how different things are this time: Not to mention, homeowners today have options they just didn’t have in the housing crisis when so many people owed more on their mortgages than their homes were worth. Today, many homeowners are equity rich. That equity comes, in large part, from the way home prices have appreciated over time. According to CoreLogic: “The total average equity per borrower has now reached almost $300,000, the highest in the data series.” Rick Sharga, Executive VP of Market Intelligence at ATTOM Data, explains the impact this has: “Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. . . . We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”  This goes to show homeowners are in a completely different position this time. For those facing challenges today, many have the option to use their equity to sell their house and avoid the foreclosure process. Bottom Line If you’re concerned we’re making the same mistakes that led to the housing crash, the graphs above should help alleviate your fears. Concrete data and expert insights clearly show why this is nothing like the last time.

What's Actually Happening with Home Prices Today?

      One of the biggest questions people are asking right now is: what’s happening with home prices? There are headlines about ongoing price appreciation, but at the same time, some sellers are reducing the price of their homes. That can feel confusing and makes it more difficult to get a clear picture. Part of the challenge is that it can be hard to understand what experts are saying when the words they use sound similar. Let’s break down the differences among those terms to help clarify what’s actually happening today. Appreciation is when home prices increase. Depreciation is when home prices decrease. Deceleration is when home prices continue to appreciate, but at a slower or more moderate pace. Experts agree that, nationally, what we’re seeing today is deceleration. That means home prices are appreciating, just not at the record-breaking pace they have over the past year. In 2021, data from CoreLogic tells us home prices appreciated by an average of 15% nationwide. And earlier this year, that appreciation was upward of 20%. This year, experts forecast home prices will appreciate at a decelerated pace of around 10 to 11%, on average. The graph below uses the latest data from CoreLogic to help tell the story of how home prices are decelerating, but not depreciating so far this year. As the green bars show, home prices appreciated between 19-20% year-over-year from January to March. But over the last few months, the pace of that appreciation has decelerated to 18%. This means price growth is still climbing compared to last year but at a slower rate. As the Monthly Mortgage Monitor from Black Knight explains: “Annual home price growth dropped by nearly two percentage points . . . – the greatest single-month slowdown on record since at least the early 1970s. . . While June’s slowdown was record-breaking, home price growth would need to decelerate at this pace for six more months to drive annual appreciation back to 5%, a rate more in line with long-run averages.” Basically, this means, while moderating, home prices are still far above the norm, and we’d have to see a lot more deceleration to even fall in line with more typical rates of home price growth. That’s still not home price depreciation. The big takeaway is home prices haven’t fallen or depreciated nationwide, they’re just decelerating or moderating. While some unique and overheated markets may see declines, nationally, home prices are forecast to appreciate. And when we look at the country as a whole, none of the experts project home prices will net depreciate or fall. They’re all projecting ongoing appreciation. Bottom Line If you have questions about what’s happening with home prices in our local area, let’s connect.

Want To Buy a Home? Now May Be the Time.

      There are more homes for sale today than at any time last year. So, if you tried to buy a home last year and were outbid or out priced, now may be your opportunity. The number of homes for sale in the U.S. has been growing over the past four months as rising mortgage rates help slow the frenzy the housing market saw during the pandemic. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains why the shifting market creates a window of opportunity for you: “This is an opportunity for people with a secure job to jump into the market, when other people are a little hesitant because of a possible recession. . . They’ll have fewer buyers to compete with.” Two Reasons There Are More Homes for Sale The first reason the market is seeing more homes available for sale is the number of sales happening each month has decreased. This slowdown has been caused by rising mortgage rates and rising home prices, leading many to postpone or put off buying. The graph below uses data from realtor.com to show how active real estate listings have risen over the past four months as a result. The second reason the market is seeing more homes available for sale is because the number of people selling their homes is also rising. The graph below outlines new monthly listings coming onto the market compared to last year. As the graph shows, for the past three months, more people have put their homes on the market than the previous year. Bottom Line The number of homes for sale across the country is growing, and that means more options for those thinking about buying a home. This is the opportunity many have been waiting for who were outbid or out priced last year.