Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

April 6, 2020

Will Surging Unemployment Crush Home Sales?

Will Surging Unemployment Crush Home Sales? | Simplifying The Market

Ten million Americans lost their jobs over the last two weeks. The next announced unemployment rate on May 8th is expected to be in the double digits. Because the health crisis brought the economy to a screeching halt, many are feeling a personal financial crisis. James Bullard, President of the Federal Reserve Bank of St. Louis, explained that the government is trying to find ways to assist those who have lost their jobs and the companies which were forced to close (think: your neighborhood restaurant). In a recent interview he said:

 

“This is a planned, organized partial shutdown of the U.S. economy in the second quarter. The overall goal is to keep everyone, households and businesses, whole.”

 

That’s promising, but we’re still uncertain as to when the recently unemployed will be able to return to work.

 

Another concern: how badly will the U.S. economy be damaged if people can’t buy homes?

A new concern is whether the high number of unemployed Americans will cause the residential real estate market to crash, putting a greater strain on the economy and leading to even more job losses. The housing industry is a major piece of the overall economy in this country.

 

Chris Herbert, Managing Director of the Joint Center for Housing Studies of Harvard University, in a post titled Responding to the Covid-19 Pandemic, addressed the toll this crisis will have on our nation, explaining:

 

“Housing is a foundational element of every person’s well-being. And with nearly a fifth of US gross domestic product rooted in housing-related expenditures, it is also critical to the well-being of our broader economy.”

 

How has the unemployment rate affected home sales in the past?

It’s logical to think there would be a direct correlation between the unemployment rate and home sales: as the unemployment rate went up, home sales would go down, and when the unemployment rate went down, home sales would go up.

 

However, research reviewing the last thirty years doesn’t show that direct relationship, as noted in the graph below. The blue and grey bars represent home sales, while the yellow line is the unemployment rate. Take a look at numbers 1 through 4:

Will Surging Unemployment Crush Home Sales? | Simplifying The Market

  1. The unemployment rate was rising between 1992-1993, yet home sales increased.
  2. The unemployment rate was rising between 2001-2003, and home sales increased.
  3. The unemployment rate was rising between 2007-2010, and home sales significantly decreased.
  4. The unemployment rate was falling continuously between 2015-2019, and home sales remained relatively flat.
  5. The impact of the unemployment rate on home sales doesn’t seem to be as strong as we may have thought.

 

Isn’t this time different?

Yes. There is no doubt the country hasn’t seen job losses this quickly in almost one hundred years. How bad could it get? Goldman Sachs projects the unemployment rate to be 15% in the third quarter of 2020, flattening to single digits by the fourth quarter of this year, and then just over 6% percent by the fourth quarter of 2021. Not ideal for the housing industry, but manageable.

 

How does this compare to the other financial crises?

Some believe this is going to be reminiscent of The Great Depression. From the standpoint of unemployment rates alone (the only thing this article addresses), it does not compare. Here are the unemployment rates during the Great Depression, the Great Recession, and the projected rates moving forward:

Will Surging Unemployment Crush Home Sales? | Simplifying The Market

Bottom Line

We’ve given you the facts as we know them. The housing market will have challenges this year. However, with the help being given to those who have lost their jobs and the fact that we’re looking at a quick recovery for the economy after we address the health problem, the housing industry should be fine in the long term. Stay safe.

April 1, 2020

The Economic Impact of Buying a Home

The Economic Impact of Buying a Home | Simplifying The Market

We’re in a changing real estate market, and life, in general, is changing too – from how we grocery shop and meal prep to the ways we can interact with our friends and neighbors. Even practices for engaging with agents, lenders, and all of the players involved in a real estate transaction are changing to a virtual format. What isn’t changing, however, is one key thing that can drive the local economy: buying a home.

 

We’re all being impacted in different ways by the effects of the coronavirus. If you’re in a position to buy a home today, know that you’re a major economic force in your neighborhood. And while we all wait patiently for the current pandemic to pass, there are a lot of things you can do in the meantime to keep your home search on track.

 

Every year the National Association of Realtors (NAR) shares a report that notes the full economic impact of home sales. This report summarizes:

 

“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”

 

Here’s the breakdown of how the average home sale boosts the economy

The Economic Impact of Buying a Home | Simplifying The Market

When you buy a home, you’re making an impact. You’re fulfilling your need for shelter and a place to live, and you’re also generating jobs and income for the appraiser, the loan officer, the title company, the real estate agent, and many more contributors to the process. For every person or business that you work with throughout the transaction, there’s also likely a team behind the scenes making it all happen, so the effort multiplies substantially. As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the extra labor it requires to build the home.

 

The report also breaks down the average economic impact by state:

The Economic Impact of Buying a Home | Simplifying The Market

As a buyer, you have an essential need for a home – and you can make an essential impact with homeownership, too. That need for shelter, comfort, and a safe place to live will always be alive and well. And whenever you’re able to act on that need, whether now or later, you’ll truly be creating gains for you, your family, local business professionals, and the overall economy.

 

Bottom Line

Whenever you purchase a home, you’re an economic driver. Even if you’re not ready or able to make a move now, there are things you can do to keep your own process moving forward so you’re set when the time is right for you. Let’s connect to keep your home search – and your local contributions – on track.

Posted in For Buyers
March 28, 2020

What You Can Do to Keep Your Dream of Homeownership Moving Forward [INFOGRAPHIC]

What You Can Do to Keep Your Dream of Homeownership Moving Forward [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Don’t put your homeownership plans on hold just because you’re stuck inside.
  • There are several things you can do right now to keep your home search moving forward.
  • Connect with an agent, learn about resource programs for things like down payments, and get pre-approved today.
March 23, 2020

Economic Slowdown: What the Experts Are Saying

Image result for economic slowdown

More and more economists are predicting a recession is imminent as the result of the pullback in the economy caused by COVID-19. According to the National Bureau of Economic Research:

 

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

 

Bill McBride, the founder of Calculated Risk, believes we are already in a recession:

 

“With the sudden economic stop, and with many states shutting down by closing down schools, bars and restaurants…my view is the US economy is now in a recession (started in March 2020), and GDP will decline sharply in Q2. The length of the recession will depend on the course of the pandemic.”

 

How deep will it go?

No one knows for sure. It depends on how long it takes to beat this virus. Goldman Sachs anticipates we will see a difficult first half of the year, but the economy will recover in the second half (see below):

Economic Slowdown: What the Experts Are Saying | Simplifying The Market

Goldman also projects we’ll have “further strong gains in early 2021.”

 

This aligns with the projection from Wells Fargo Investment Institute:

 

“Once the virus infection rate peaks, we expect a recovery to gain momentum into the final quarter of the year and especially into 2021.”

 

Again, no one knows for sure how long the pandemic will last. The hope is that it will resolve sometime over the next several months. Most agree that when it does, the economy will regain its strength quickly.

 

*Quarter 1 data from Goldman Sachs was updated from 0% to -0.2% on 3/17/20 after the initial release.

Bottom Line

This virus is not only impacting the physical health of Americans, but also the financial health of the nation. The sooner we beat it, the sooner our lives will return to normal.

March 18, 2020

Three Reasons Why This Is Not a Housing Crisis

Three Reasons Why This Is Not a Housing Crisis | Simplifying The Market

In times of uncertainty, one of the best things we can do to ease our fears is to educate ourselves with research, facts, and data. Digging into past experiences by reviewing historical trends and understanding the peaks and valleys of what’s come before us is one of the many ways we can confidently evaluate any situation. With concerns of a global recession on everyone’s minds today, it’s important to take an objective look at what has transpired over the years and how the housing market has successfully weathered these storms.

 

1. The Market Today Is Vastly Different from 2008

We all remember 2008. This is not 2008. Today’s market conditions are far from the time when housing was a key factor that triggered a recession. From easy-to-access mortgages to skyrocketing home price appreciation, a surplus of inventory, excessive equity-tapping, and more – we’re not where we were 12 years ago. None of those factors are in play today. Rest assured, housing is not a catalyst that could spiral us back to that time or place.

 

According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:

 

“It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have many households who are overleveraged with their mortgage payments and are potentially in trouble.”

 

In addition, the Goldman Sachs GDP Forecast released this week indicates that although there is no growth anticipated immediately, gains are forecasted heading into the second half of this year and getting even stronger in early 2021.

Three Reasons Why This Is Not a Housing Crisis | Simplifying The Market

Both of these expert sources indicate this is a momentary event in time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 2008 that failed to get back to a sense of normal for almost four years. Although it poses plenty of near-term financial challenges, a potential recession this year is not a repeat of the long-term housing market crash we remember all too well.

 

2. A Recession Does Not Equal a Housing Crisis

Next, take a look at the past five recessions in U.S. history. Home values actually appreciated in three of them. It is true that they sank by almost 20% during the last recession, but as we’ve identified above, 2008 presented different circumstances. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6% (see below):

Three Reasons Why This Is Not a Housing Crisis | Simplifying The Market

3. We Can Be Confident About What We Know

Concerns about the global impact COVID-19 will have on the economy are real. And they’re scary, as the health and wellness of our friends, families, and loved ones are high on everyone’s emotional radar.

 

According to Bloomberg,

 

“Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up.”

 

That said, we can be confident that, while we don’t know the exact impact the virus will have on the housing market, we do know that housing isn’t the driver.

 

The reasons we move – marriage, children, job changes, retirement, etc. – are steadfast parts of life. As noted in a recent piece in the New York Times, “Everyone needs someplace to live.” That won’t change.

 

Bottom Line

Concerns about a recession are real, but housing isn’t the driver. If you have questions about what it means for your family’s homebuying or selling plans, let’s connect to discuss your needs.

March 16, 2020

5 Simple Graphs Proving This Is NOT Like the Last Time

5 Simple Graphs Proving This Is NOT Like the Last Time | Simplifying The Market

With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

 

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

 

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

 

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.

 

5 Simple Graphs Proving This Is NOT Like the Last Time | Simplifying The Market

 

2. Prices are not soaring out of control.

Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.

5 Simple Graphs Proving This Is NOT Like the Last Time | Simplifying The Market

There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

 

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.

5 Simple Graphs Proving This Is NOT Like the Last Time | Simplifying The Market

 

4. Houses became too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:5 Simple Graphs Proving This Is NOT Like the Last Time | Simplifying The Market

5. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:5 Simple Graphs Proving This Is NOT Like the Last Time | Simplifying The MarketD

DDuring the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.

 

Bottom Line

If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

March 14, 2020

Impact of the Coronavirus on the U.S. Housing Market

The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.

 

With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?

 

The National Association of Realtors (NAR) anticipates:

 

“At the very least, the coronavirus could cause some people to put home sales on hold.”

 

While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.

 

For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.

 

According to the National Association of Home Builders (NAHB):

 

“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”

 

This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.

 

Bottom Line

The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.

Posted in For Buyers, For Sellers
March 10, 2020

Equity Gain Growing in Nearly Every State

Equity Gain Growing in Nearly Every State | Simplifying The Market

Rising home prices have been in the news a lot lately, and much of the focus is on whether they’re accelerating too quickly and how sustainable the growth in prices really is. One of the often-overlooked benefits of rising prices, however, is the impact they have on a homeowner’s equity position.

 

Home equity is defined as the difference between a home’s fair market value and the outstanding balance of all liens on the property. While homeowners pay down their mortgages, the amount of equity they have in their homes climbs each time the value increases.

 

Today, the number of homeowners that currently have significant equity in their homes is growing. According to the Census Bureau, 38% of all homes in the country are mortgage-free.  In a home equity study, ATTOM Data Solutions revealed that of the 54.5 million homes with a mortgage, 26.7% of them have at least 50% equity. That number has been increasing over the last eight years.

 

CoreLogic also notes:

 

“…the average homeowner gained approximately $5,300 in equity during the past year.”

 

The map below shows a breakdown of the increased equity gain across the country, painting a clear picture that home equity is growing in nearly every state. Equity Gain Growing in Nearly Every State | Simplifying The Market

Equity Gain Growing in Nearly Every State | Simplifying The Market

Bottom Line

This may be the year to take advantage of your home equity by applying it forward, either as you downsize or as you move up to a new home.

March 3, 2020

How Your Tax Refund Can Move You Toward Homeownership This Year

How Your Tax Refund Can Move You Toward Homeownership This Year | Simplifying The Market

If you’re looking to buy a home in 2020, have you thought about putting your tax refund toward a down payment? Homeownership may be one step closer than you think if you spend your dollars wisely this year.

 

Based on data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,962 when filing their taxes this year.

 

The map below shows the average tax refund Americans received last year by state:

How Your Tax Refund Can Move You Toward Homeownership This Year | Simplifying The Market

According to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. Truth be told, a 20% down payment is not always required to buy a home, even though that’s a common misconception about homebuying. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.

 

How can my tax refund help?

If you’re a first-time buyer, your tax refund may cover more of a down payment than you ever thought possible.

 

If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average tax refund:

How Your Tax Refund Can Move You Toward Homeownership This Year | Simplifying The Market

The darker the blue, the closer your tax refund gets you to homeownership in one of these programs. Maybe this is the year to plan ahead and put your tax refund toward a down payment on a home.

 

Bottom Line

Saving for a down payment can seem like a daunting task, but the more you know about what’s required, the more prepared you’ll be to make the best decision for you and your family. This tax season, your refund could be your key to homeownership.

 

March 3, 2020

How Interest Rates Can Impact Your Monthly Housing Payments

How Interest Rates Can Impact Your Monthly Housing Payments | Simplifying The Market

Spring is right around the corner, so flowers are starting to bloom, and many potential homebuyers are getting ready to step into the market. If you’re thinking of buying this season, here’s how mortgage interest rates are working in your favor.

 

Freddie Mac explains:

 

“If you’re in the market to buy a home, today’s average mortgage rates are something to celebrate compared to almost any year since 1971…

 

Mortgage rates change frequently. Over the last 45 years, they have ranged from a high of 18.63% (1981) to a low of 3.31% (2012). While it’s not likely that the average 30-year fixed mortgage rate will return to its record low, the current average rate of 3.45% is pretty close — all to your advantage.”

 

To put this in perspective, the following chart from the same article shows how average mortgage rates by decade have impacted the approximate monthly payment of a $200,000 home over time:How Interest Rates Can Impact Your Monthly Housing Payments | Simplifying The MarketClearly, when rates are low – like they are today – qualified buyers can benefit significantly over time.

How Interest Rates Can Impact Your Monthly Housing Payments | Simplifying The Market

Keep in mind, if interest rates go up, this can push many potential homebuyers out of the market. The National Association of Home Builders (NAHB) notes:

 

“Prospective home buyers are also adversely affected when interest rates rise. NAHB’s priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.75% on a 30-year fixed-rate mortgage can price over 1.3 million U.S. households out of the market for the median-priced new home.”

 

Bottom Line

You certainly don’t want to be priced out of the market this year, and waiting may mean a significant change in your potential mortgage payment should rate start to rise. If your financial situation allows, now may be a great time to lock in at a low mortgage rate to benefit greatly over the lifetime of your loan.