Mortgage rates will continue ticking up

By Clare Trapasso
Dec 1, 2021

3 of a 3 part series
Highlights:

  • Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022.
  • Rental prices have been soaring, and tenants aren’t expected to get any relief. Prices have surged and are expected to continue rising by 7.1% in 2022.
  • The culprit behind the price hikes: There simply aren’t enough homes to go around—for rent or sale.

Mortgage rates have been the wild card to the housing market during the pandemic. Low rates at the start of COVID-19 helped fuel dizzying price jumps as buyers could afford to spend more on homes. That’s because they were paying less interest each month so they could absorb the higher home prices.

However, as the economy has improved and inflation has risen, making everything from a dozen eggs to a gallon of gas more expensive, rates are also expected to go up. That could help curb the runaway price growth that was seen in the spring. Buyers can stretch their budgets only so far.

Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022. That’s up from a low of 2.65% in the first week of January for 30-year fixed-rate loans, according to Freddie Mac data.

While that doesn’t sound like much of a hike, it adds up.

The difference of roughly a percentage point to 3.6% would result in about $157 extra tacked on to the monthly payment of a median-priced home of $380,000. That can total more than $56,500 over the life of a 30-year loan. (This assumes the buyers put down 20% and does not include property taxes, insurance costs, or homeowners association fees.)

It’s also likely to result in homebuying becoming even more expensive. With home prices continuing to tick up a little and rates increasing, those purchasing a home with a mortgage will wind up shelling out more each month.

Rents will keep shooting up higher than home prices

It isn’t just homebuying that’s gotten more expensive. Rental prices have been soaring, and tenants aren’t expected to get any relief. Prices have surged and are expected to continue rising by 7.1% in 2022.

At the beginning of the pandemic, as home sale prices spiraled, rents in many of the big cities dropped precipitously. Many tenants moved to larger, nicer apartments with more amenities at deeply discounted rents. Then this year, they were hit with steep increases even in smaller, more traditionally affordable cities and suburbs.

The culprit behind the price hikes: There simply aren’t enough homes to go around—for rent or sale. Many aspiring homebuyers who keep losing bidding wars or can’t afford high homes prices are stuck renting. Plus, there are plenty of folks who moved in with family and roommates or split up with their partners during the pandemic who are looking for their own rentals.

“With apartment vacancies still near historic lows and landlords making up for lost rent increases during the pandemic, rents are expected to continue to grow,” says Hale.


Not many more homes are expected to go up for sale

By Clare Trapasso
Dec 1, 2021

2 of a 3 part series
Highlights:

  • “The shortage of homes for sale, that has been more than a decade in the making, will keep home prices high,”
  • Millennials are a massive generation—next year, there will be more than 45 million millennials between the ages of 26 and 35, which are prime homebuying years.

Unfortunately, for frustrated buyers who have had trouble finding the right homes in the right locations at the right price, there isn’t expected to be a rush of homes hitting the market.

Realtor.com economists predict the number of homes for sale, which is hovering around record lows, will tick up only 0.3%. That’s partly due to builders having a tough time ramping up construction as they contend with shortages in workers and materials, compounded by the global supply chain backups. (Single-family housing starts, which is when builders start construction, is expected to rise only 5% next year.)

There are plenty of investors snapping up single-family homes and turning them into rentals. And there is no tidal wave of foreclosures expected to hit now that the government moratoriums are expiring.

There are also more homebuyers today than there are abodes for sale.

Millennials are a massive generation—next year, there will be more than 45 million millennials between the ages of 26 and 35, which are prime homebuying years. So there would need to be substantially more homes built to keep up with the needed housing—except builders stopped building during the Great Recession and there are fewer homes going up today.

“The shortage of homes for sale, that has been more than a decade in the making, will keep home prices high,” says Hale.

Sales will also continue to climb, hitting a 16-year high as they go up by 6.6%, Realtor.com economists anticipate. That’s partly because technology has sped up the homebuying process. Plus, buyers are jumping on whatever comes up for sale in record time before the property is snapped up by another eager buyer.

Attractively priced homes in good shape are expected to continue going under contract quickly.

“Homes are selling so much faster than they have in any previous [years],” says Hale.

That speed supports increased housing turnover as more abodes change hands as folks move into their first homes or relocate, trade up into larger residences, and downsize.

The popularity of the suburbs is also likely to endure. They emerged as the places to be during the pandemic as buyers could score more square footage and bigger yards for less money than in the bigger cities.

“For years, we heard about the dying suburbs because millennials didn’t want to live there, but as they age, guess where they’re heading?” asks Hale.

Some were even moving to the burbs before the pandemic.

“This budding trend was accelerated by the needs of aging millennials, often with families, trying to grapple head-on with the realities of doing more than ever before from home,” says Hale.

Remote work will also likely be a factor. With more workers telecommuting or going into the office only a few times a week, they don’t have to contend with grueling commutes five days a week. Many are more comfortable moving farther outside of the cities where they can get larger abodes with room for a home office at an attractive price.

That’s likely to keep prices high in desirable communities.

“Shoppers were looking for affordable homes with space that could be used flexibly to accommodate working, schooling, exercising, cooking, and all of the other living and relaxing we used to take for granted,” says Hale.

It won’t be easy for first-time homebuyers

First-time buyers are likely to continue struggling to compete with the offers over the asking price and win the bidding wars.

The ace in their pocket is the work-from-home phenomenon that has allowed many white-collar professionals to work from anywhere they have a strong Wi-Fi connection. So they may be able to relocate to cheaper destinations that make up for what they lack in Michelin star restaurants with more affordable home prices.

“Maybe they’re not buying a home in or near a major city where prices are high and the market is still competitive,” says Hale. “But they can move farther away from the city to the suburbs or to an entirely new city where it’s more affordable.”

The savings many who held on to their jobs were able to amass early on in the pandemic—when the stimulus checks went out and many folks cut back on dining out and traveling—may help them with the down payments. Some buyers temporarily moved back home with families or doubled up with friends to save on housing costs as well.

“I know a lot of people are expecting housing prices and sales to peak and then decline. Instead, I think there’s enough momentum from these younger buyers who want to get into the housing market to keep sales moving forward,” says Hale. “They are going to succeed because that drive to buy a home and make it happen when you’re ready is really strong.”


Will Home Prices and Rents Finally Fall? Our Bold Predictions on Real Estate in 2022

By Clare Trapasso
Dec 1, 2021

1 of a 3 part series
Highlights:

  • Prices will stay high, inventory will remain tight, and mortgage rates will rise
  • Prices aren’t anticipated to come down from the highs
  • “The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes”

Here’s what we already know: Since the COVID-19 pandemic began, the real estate market has been on a wild ride of unprecedented highs and lows—record-high home prices on one side, record-low mortgage rates and available homes for sale on the other. It’s been a time of overwhelming stress for many, gigantic profits for some, and great disorientation for most of us.

Now the housing experts say the market is “normalizing.” But what does that mean? Will home prices and rents finally come down? Will more homes go up for sale? And what does the year ahead have in store for the real estate market?

The Realtor.com® 2022 housing forecast anticipates the market will continue slowing down from the frenzy seen in the spring when prices shot up to new heights. However, prices will stay high, inventory will remain tight, and mortgage rates will rise.

The bottom line: Even as the market calms down further, it’s still expected to be challenging for buyers, especially those purchasing their first homes.

“The 2022 housing market will continue to be a seller’s market with fast-moving homes and rising prices,” says Realtor.com Chief Economist Danielle Hale. “But the competition should be a bit less intense than we’ve seen recently.”

Home prices will stay high, but price growth will continue slowing

Home prices aren’t expected to keep zooming up into the stratosphere in 2022 the way they did this year. So buyers can breathe at least a shallow sigh of relief. Instead, Realtor.com economists anticipate they’ll increase at a much slower rate of just 2.9% over this year compared with an anticipated 12% rise in 2021.

This means the double-digit price growth that confounded buyers earlier this year is expected to taper off.

However, prices aren’t anticipated to come down from the highs they reached this year due to the continuing shortage of properties for sale and hordes of buyers continuing to enter the market. They just won’t go up so much as quickly.

“Price growth is expected to move back toward a normal range, but this is on top of recent high prices,” says Hale. “So prices will [still] hit new highs.”

While that’s not great news for buyers, homes aren’t expected to cost much more than they did just a few months ago.

“The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes,” says Hale. “With prices high and mortgage rates beginning to tick up, people won’t be able to be as aggressive in what they’re willing to pay.”


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Listed | October 22, 2021

Tremendous opportunity for an investor and/or owner to remodel this singe family Cape Cod. As is, 3 bedrooms, 1 bath, needs work. Conveniently located, close to downtown Kensington (1/2mi), local parks, weekly farmers market, shops, restaurants, commuter MARC station and 1.3 miles from Wheaton Metro.

Link to Listing


5 Reasons Today’s Housing Market Is Anything but Normal

5 Reasons Today's Housing Market Is Anything but Normal | MyKCM

There are many headlines out there that claim we’re reverting to a more normal real estate market. That would indicate the housing market is returning to the pre-pandemic numbers we saw from 2015-2019. But that’s not happening. The market is still extremely vibrant as demand is still strong even while housing supply is slowly returning.

Here’s the definition of normal from the Merriam-Webster Dictionary:

“conforming to a type, standard, or regular pattern: characterized by that which is considered usual, typical, or routine.

Using this definition, here are five housing industry metrics that prove we’re nowhere near normal.

1. Mortgage Rates

If we look at the 30-year mortgage rate chronicled by Freddie Mac, we can see the average rates by decade:

  • 1970s: 8.86%
  • 1980s: 12.7%
  • 1990s: 8.12%
  • 2000s: 6.29%
  • 2010s: 4.09%

Today, the average mortgage rate stands at 2.87%, which is very close to the historic low.

Currently, mortgage rates are anything but usual, typical, or routine.

2. Home Price Appreciation

According to Black Knight, a housing data and analytics company, the average annual appreciation on residential real estate prices since 1995 has been 4.14%.

According to the latest forecast from the National Association of Realtors (NAR), home price appreciation will hit 14.1% this year, which will be greater than any year since Black Knight began collecting this data.

Currently, home price appreciation is anything but usual, typical, or routine.

3. Months’ Supply of Inventory (Homes for Sale)

According to NAR:

“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”

As of the latest Existing Homes Sales Report from NAR, the current months’ supply of inventory stands at 2.6. That’s less than half of a normal supply.

Currently, the supply of homes for sale is anything but usual, typical, or routine.

4. Days It Takes To Sell a Home

The days-on-market metric gives an indication of how hot a market is and how quickly homes are selling. In 2019, prior to the pandemic, the average days on market stood at 35, according to NAR. Today, that number is cut in half and is now at 17 days.

Currently, the days-on-market metric is anything but usual, typical, or routine.

5. Number of Offers per Listing

According to NAR, the number of offers per listing stood at 2.2 in 2019. Today, that number is double at 4.5.

Currently, the number of offers per listing is anything but usual, typical, or routine.

Bottom Line

When…

  1. Mortgage rates are near historic lows
  2. Price appreciation is at historic highs
  3. Housing inventory is less than half of the normal amount
  4. The time it takes to sell a home is cut in half, and
  5. There are twice as many offers on each house

…it’s hard to say we’re in a normal market.


Experts Say You Have to Stand Out In Today’s Real Estate Market

My clients are standouts every day. Each helping to provide for and serve their community. Most recently, one runs a community farmers market, one is a federal law enforcement officer and another is a social media guru, community advocate and owner of a small business. Real estate is a people business and I get to work with some outstanding ones.

SOLD


“Laurel is an amazing professional and one of the best in the business. She is well plugged in DMV real estate network – something that comes extremely handy when you are selling your home. She came prepared with a plan to market our home and got us the price we were comfortable with in 3 days. We could not recommend her enough especially for sales in north Chevy Chase neighborhood.” – read more LMRE reviews

First Time Home Buyers


Shout out to @taylorxpatrick for recognizing me on Instagram to her thousands of followers. I feel like this is the beginning of a long standing friendship. Not only in helping you and Asia close on your first home but also working together on some custom client closing gifts.


Are We Headed For A Housing Crash? Is The Market Heading Into A Housing Bubble?

Experts Say Home Prices Will Continue to Appreciate

Experts Say Home Prices Will Continue to Appreciate | MyKCM

It’s clear that consumers are concerned about how quickly home values are rising. Many people fear the speed of appreciation may lead to a crash in prices later this year. In fact, Google reports that the search for “When is the housing market going to crash?” has actually spiked 2450% over the past month.

In addition, Jim Dalrymple II of Inman News notes:

“One of the most noteworthy things that came up in Inman’s conversations with agents was that every single one said they’ve had conversations with clients about whether or not the market is heading into a bubble.”

To alleviate some of these concerns, let’s look at what several financial analysts are saying about the current residential real estate market. Within the last thirty days, four of the major financial services giants came to the same conclusion: the housing market is strong, and price appreciation will continue. Here are their statements on the issue:

Goldman Sachs’ Research Note on Housing:

“Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. … consumer surveys indicate that household buying intentions are now the highest in 20 years. … As a result, the model projects double-digit price gains both this year and next.”

Joe Seydl, Senior Markets EconomistJ.P.Morgan:

“Homebuyers—interest rates are still historically low, though they are inching up. Housing prices have spiked during the last six-to-nine months, but we don’t expect them to fall soon, and we believe they are more likely to keep rising. If you are looking to purchase a new home, conditions now may be better than 12 months hence.”

Morgan Stanley, Thoughts on the Market Podcast:

“Unlike 15 years ago, the euphoria in today’s home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation . . . . This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course.”

Merrill Lynch’s Capital Market Outlook:

“There are reasons to believe that this is likely to be an unusually long and strong housing expansion. Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle. Coronavirus-related preference changes have also sharply boosted home buying demand. At the same time, supply is unusually tight, with available homes for sale at record-low levels. Double-digit price gains are rationing the supply.”

Bottom Line

If you’re concerned about making the decision to buy or sell right now, let’s connect to discuss what’s happening in our local market.


What’s Driving The Sellers Advantage? An Opportunity For Homeowners Who Are Ready To Move This Season.

3 Graphs Showing Why You Should Sell Your House Now

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

There’s no doubt that 2021 is the year of the seller when it comes to the housing market. If you’re a homeowner thinking of moving to better suit your changing needs, now is the perfect time to do so. Low mortgage rates are in your favor when you’re ready to purchase your dream home, and high buyer demand may give you the leverage you need to negotiate the best contract terms on the sale of your house. Here’s a look at what’s driving this sellers’ advantage and why there’s so much opportunity for homeowners who are ready to move this season.

1. Historically Low Inventory

The National Association of Realtors (NAR) explains:

 “Total housing inventory at the end of March amounted to 1.07 million units, up 3.9% from February’s inventory . . . Unsold inventory sits at a 2.1-month supply at the current sales pace, marginally up from February’s 2.0-month supply and down from the 3.3-month supply recorded in March 2020.”

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

Even with a slight rise in the number of houses for sale this spring, inventory remains near an all-time low (See graph below):High buyer interest is creating a major imbalance between supply and demand, but as the small uptick in inventory shows, sellers are beginning to reenter the market. Selling your house now enables you to take advantage of buyer demand and get the most attention for your house – before more listings come to the market later this year.

2. Frequent Bidding Wars

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

As a result of the supply and demand imbalance, homebuyers are entering bidding wars at an accelerating rate. NAR reports the average number of bids received on the most recently closed sales is 4.8 offers. This number has doubled since the first quarter of 2020 (See graph below):As buyers face increasingly tough competition while searching for homes to purchase, they’re more likely to be flexible and generous in their negotiations. This gives a seller the opportunity to choose the best buyer for their needs and be selective about things like time to close, contingencies, renovations, and more. Working with your trusted agent is the best way to determine how to navigate the negotiation process when selling your house.

3. Days on the Market

In today’s market, sellers aren’t waiting very long to find a buyer for their house, either. NAR reports:

Properties typically remained on the market for 18 days in March, down from 20 days in February and from 29 days in March 2020. 83% of the homes sold in March 2021 were on the market for less than a month.” (See graph below):

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

NAR Chief Economist Lawrence Yun explains:

“The sales for March would have been measurably higher, had there been more inventory…Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”

Bottom Line

If you’re thinking about moving, these three graphs clearly show that it’s a great time to sell your house. Let’s connect today so you can learn more about the opportunities in our local area.


Crazy Market Or Not, The Same Fundamentals Of Selling Real Estate Apply

The sale of S506 serves as another testament that selling with a plan in place is the best way too close for the most money within the specific markets current days on market.

It took just over a month from my first meeting with the owner, to customize a plan detailing how to make the unit market ready, complete the pre-listing items identified, list the property on the MLS, hold an Open House and ratify an offer. Success takes a team effort and effective, constant communications. My clients did an awesome job. Congratulations!

Days On Market: 5, average for the building 28


The Need For More Inventory Has Never Been More Apparent

Based on compiled data from more than six million property showings scheduled across the country, Home Buyer Demand jumps 98.4% in the West as traffic grows again nationwide.

  • March 24, 2021 – Dwindling inventory was again met with an outpouring of buyer demand throughout the country in February as an unprecedented 75 markets reported double-digit growth, according to the ShowingTime Showing Index®
  • Nationwide, buyer traffic jumped 49.5 percent, continuing a trend of national year-over-year growth in buyer demand that began in May 2020.
  • “In March and April, year-over-year comparisons will be less meaningful as the onset of COVID-19 in 2020 drove showing traffic down in those two months, but on a month-to-month basis we’re still likely to see further seasonal increases in demand, taking us further into this unprecedented direction. We expect that this will correlate with continued broad increases in prices.”