Myths About Today’s Housing Market

Myths About Today’s Housing Market [INFOGRAPHIC] | MyKCM

Some Highlights

  • If you’re planning to buy or sell a home today, it’s important to be aware of common misconceptions.
  • Whether it’s timing your purchase as a buyer based on home prices and mortgage rates or knowing what to upgrade or repair before listing your house as a seller, it takes a professional to guide you through those decisions.
  • Let’s connect so you have an expert to help separate fact from fiction in today’s housing market.

The Federal Reserve Is Ready To Raise Interest Rates Soon Despite The War In Ukraine

SCOTT HORSLEY Twitter LISTEN· 4:10
Heard on All Things Considered

Federal Reserve Chair Jerome Powell testifies about monetary policy and the state of the economy before the House Financial Services Committee on Wednesday. Powell reiterated the Fed is gearing up to raise interest rates this month.

Federal Reserve Chair Jerome Powell said on Wednesday the central bank is on track to start raising interest rates this month — likely by a quarter percentage point — in an effort to combat inflation, which is the highest it’s been in nearly 40 years.

But the Fed will proceed with caution, Powell told the House Financial Services Committee, as Russia’s invasion of Ukraine adds more uncertainty to the economic outlook.

“The economics of these events are highly uncertain,” Powell said. “So far, we’ve seen energy prices move up further and those increases will move through the economy and push up headline inflation, and also they’re going to weigh on spending.”

The average price of gasoline in the U.S. approached $3.66 per gallon on Wednesday. Rising energy prices have been a significant driver of annual inflation, which hit 7.5% in January – the highest level since 1982.

Powell says it’s too soon to tell on Ukraine

Powell said it’s too soon to know how large or long-lasting price increases tied to events in Ukraine will be, so he and his colleagues on the central bank’s rate-setting committee are prepared to be flexible.

“We’re never on auto-pilot,” Powell said. “Those of us on the committee have an expectation that inflation will peak and begin to come down this year. And to the extent that inflation comes in higher or is more persistently high than that, then we would be prepared move more aggressively.”

Forecasters expect the Fed to impose additional interest rate hikes later this year in an effort to cool red-hot consumer demand, which has outstripped supply and driven prices sharply higher.



read the NPR full article


Housing Wealth Is Setting New Records For Both Owners And Sellers

By: Diana Olick CNBC Real Estate Correspondent

KEY POINTS

  • The profit on a typical home sale last year was just over $94,000, an increase of 45% from the profit in 2020 and 71% from pre-pandemic profits.
  • About 42% of homeowners were considered equity-rich at the end of last year
  • The amount of tappable equity (equity above the 20% usually required by lenders to back a mortgage) grew by $2.6 trillion last year to a record total of $9.9 trillion.

The stunning jump in home values over the course of the Covid-19 pandemic has given U.S. homeowners record amounts of housing wealth. What they choose to do with it could have impacts on the broader economy. 

Annual home price gains averaged 15% in 2021, up from 6% in 2020, according to CoreLogic. Strong pandemic-driven demand, record low supply and record low mortgage rates conspired to create those hefty gains. Bidding wars are now the norm, and desperate buyers are competing with investors who want to cash in on the hot market. The upward trend is continuing, despite winter being historically the slowest season for housing.

“While we expect this year’s buyers will eventually see some relief from the 2021 frenzy, home shoppers continue to face challenging conditions in the early days of 2022,” said Danielle Hale, chief economist for Realtor.com. “In fact, last week’s home price and time on market trends suggest competition intensified.”


Americans Choose Real Estate as the Best Investment

  • According to a Gallup poll, real estate has been rated the best long-term investment for eight years in a row.
  • Real estate tops the list because you’re not just buying a place to call home – you’re investing in your future. Real estate is typically considered a stable and secure asset that can grow in value over time.
  • Let’s connect today if you’re ready to make real estate your best investment this year.
Americans Choose Real Estate as the Best Investment [INFOGRAPHIC] | MyKCM

Why Waiting To Sell Your House Could Cost You a Small Fortune

Why Waiting To Sell Your House Could Cost You a Small Fortune | MyKCM

Many homeowners who plan to sell in 2022 may think the wise thing to do is to wait for the spring buying market since historically about 40 percent of home sales occur between April and July. However, this year’s expected to be much different than the norm. Here are five reasons to list your house now rather than waiting until the spring.

1. Buyers Are Looking Right Now, and They’re Ready To Purchase

The ShowingTime Showing Index reports data from more than six million property showings scheduled across the country each month. In other words, it’s a gauge of how many buyers are out looking at homes at the current time.

The latest index, which covers November showings, reveals that buyers are still very active in the market. Comparing this November’s numbers to previous years, this graph shows that the index is higher than last year and much higher than the three years prior to the pandemic. Clearly, there’s an influx of buyers searching for your home.

Why Waiting To Sell Your House Could Cost You a Small Fortune | MyKCM

Also, at this time of year, only those purchasers who are serious about buying a home will be in the market. You and your loved ones won’t be inconvenienced by casual searchers. Freddie Mac addresses this in a recent blog:

“The buyers who are willing to house hunt in a winter market, when there are fewer options, are typically more serious. Plus, year-end bonuses and overtime payouts give people more purchasing power.”

And that theory is proving to be true right now based on the number of buyers who have put a home under contract to purchase. The National Association of Realtors (NAR) publishes a monthly Pending Home Sales Index which measures housing contract activity. It’s based on signed real estate contracts for existing single-family homes, condos, and co-ops. The latest index shows:

“…housing demand continues to be high. . . . Homes placed on the market for sale go from ‘listed status’ to ‘under contract’ in approximately 18 days.”

Comparing the index to previous Novembers, while it’s slightly below November 2020 (when sales were pushed to later in the year because of the pandemic), it’s well above the previous three years.

Why Waiting To Sell Your House Could Cost You a Small Fortune | MyKCM

The takeaway for you: There are purchasers in the market, and they’re ready and willing to buy.

2. Other Sellers Plan To List Earlier This Year

The law of supply and demand tells us that if you want the best price possible and to negotiate your ideal contract terms, put your house on the market when there’s strong demand and less competition.

recent study by realtor.com reveals that, unlike in previous years, sellers plan to list their homes this winter instead of waiting until spring or summer. The study shows that 65% of sellers who plan to sell in 2022 have either already listed their home (19%) or are planning to put it on the market this winter.

Again, if you’re looking for the best price and the ability to best negotiate the other terms of the sale of your house, listing before this competition hits the market makes sense.

3. Newly Constructed Homes Will Be Your Competition in the Spring

In 2020, there were over 979,000 new single-family housing units authorized by building permits. Many of those homes have yet to be built because of labor shortages and supply chain bottlenecks brought on by the pandemic. They will, however, be completed in 2022. That will create additional competition when you sell your house. Beating these newly constructed homes to the market is something you should consider to ensure your house gets as much attention from interested buyers as possible.

4. There Will Never Be a Better Time To Move-Up

If you’re moving into a larger, more expensive home, consider doing it now. Prices are projected to appreciate by approximately 5% over the next 12 months. That means it will cost you more (both in down payment and mortgage payment) if you wait. You can also lock in your 30-year housing expense with a mortgage rate in the low 3’s right now. If you’re thinking of selling in 2022, you may want to do it now instead of waiting, as mortgage rates are forecast to rise throughout the year.

5. It May Be Time for You To Make a Change

Consider why you’re thinking of selling in the first place and determine whether it’s worth waiting. Is waiting more important than being closer to your loved ones now? Is waiting more important than your health? Is waiting more important than having the space you truly need?

Only you know the answers to those questions. Take time to think about your goals and priorities as we move into 2022 and consider what’s most important to act on now.

Bottom Line

If you’ve been debating whether or not to sell your house and are curious about market conditions in your area, let’s connect so you have expert advice on the best time to put your house on the market.


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.


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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Rising Prices Push Home Equity to Its Highest Level in 10 Years

Source: Rising Prices Push Home Equity to Its Highest Level in 10 Years
Highlights:

  • Homeowners with a mortgage gained a 29.3% year-to-year increase. It’s the biggest jump since 2Q 2010.
  • Wolf projects that U.S. home price growth will slow to about 5% next year
  • Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”

LOS ANGELES (AP) – Soaring home prices have pushed up average homeowner equity growth to the highest level in more than a decade, though recent signs of a cooling U.S. housing market point to more moderate gains in the second half of the year.

Homes with a mortgage gained an average of $51,500 in equity in the second quarter, an increase of 29.3% from the April-June quarter last year, according to real estate information company CoreLogic. That’s the highest quarterly average gain in home equity since the second quarter of 2010, the firm said.

That works out to nearly $3 trillion in equity gained by U.S. homeowners with a mortgage, which is about 63% of all homes, CoreLogic said. Average homeowner equity jumped nearly 20% in the first quarter from a year earlier.

Home equity growth can have broad impacts on the economy, giving homeowners more financial flexibility to spend on big purchases or build a nest egg. Rising home values also make it increasingly tougher for would-be homeowners to buy.

Homeowners in California, Washington state and Idaho saw among the biggest average equity increases in the second quarter: $116,000 in California, $103,000 in Washington state and $97,000 in Idaho.

The surge in homeowner equity gains follows a record run up in U.S. home prices this year amid a searing hot housing market fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic.

S&P said this week that its closely watched S&P CoreLogic Case-Shiller 20-city home price index surged 19.9% in July from a year earlier, the largest gain on records dating back to 2000.

Still, there are signs the soaring home price gains fueling homeowner equity may have peaked. The National Association of Realtors’ most recent housing market snapshot showed the median home price of previously occupied U.S. homes rose 14.9% in August from a year earlier to $356,700. That’s a more modest gain than earlier this year, when year-over-year increases were running at 20%-25%.

“It seems that there was that shift from July to August where there starts to be a little bit of pushback in terms of where prices have gone,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker.

Wolf projects that U.S. home price growth will slow to about 5% next year, citing expectations of modestly higher mortgage rates and a small but notable increase in the number of homes on the market.

“The days of runaway home price growth are behind us,” she said.

In its most recent quarterly housing forecast, mortgage buyer Freddie Mac envisions home prices growing 5.3% next year, down from a projected 12.1% increase in 2021.

If those home price outlooks hold, it would translate into a less torrid pace for homeowner equity growth next year. Still, the outsized growth in homeowner equity this year will have ripple effects for the broader economy, and the housing market. Rising homeowner equity creates a buffer for borrowers against potential financial hardship, such as job loss. And it can give homeowners financial flexibility to borrow against their equity to pay off high-interest debt or finance large purchases, such as home improvement projects, which can give a boost to the economy.

“It is good for wider economic growth, but there’s an ugly side to today’s level of pricing,” Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”

The surge in home prices this year has made it tougher for would-be homeowners to buy. First-time buyers accounted for 29% of home sales in August, according to the National Association of Realtors. A year ago they made up 33% of buyers.

The U.S. homeownership rate was 65.4% in the second quarter, down from 66.6% last year and 66.2% a decade ago.

The increase in home equity has helped limit the number of homeowners who end up “underwater” on their mortgage, or owing more on their loan than their home is worth. Also known as being in negative equity, that can happen when a home’s value declines, or when the size of the mortgage increases, say when someone takes out a home equity loan.

At the end of the second quarter, 1.2 million homes, or 2.3% of all U.S. homes with a mortgage, were in negative equity, CoreLogic said. That’s down 30% from the same quarter last year.

Among U.S. metropolitan areas, Chicago had the biggest share of homes with negative equity in the April-June quarter at 5.2%, the firm said.

 


Is the Number of Homes for Sale Finally Growing?

Is the Number of Homes for Sale Finally Growing? | MyKCM

An important metric in today’s residential real estate market is the number of homes available for sale. The shortage of available housing inventory is the major reason for the double-digit price appreciation we’ve seen in each of the last two years. It’s the reason many would-be purchasers are frustrated with the bidding wars over the homes that are available. However, signs of relief are finally appearing.

According to data from realtor.com, active listings have increased over the last four months. They define active listings as:

The active listing count tracks the number of for sale properties on the market, excluding pending listings where a pending status is available. This is a snapshot measure of how many active listings can be expected on any given day of the specified month.”

What normally happens throughout the year?

Is the Number of Homes for Sale Finally Growing? | MyKCM

Historically, housing inventory increases throughout the summer months, starts to tail off in the fall, and then drops significantly over the winter. The graph below shows this trend along with the month active listings peaked in 2017, 2018, and 2019.

What happened last year?

Is the Number of Homes for Sale Finally Growing? | MyKCM

Last year, the trend was different. Historical seasonality wasn’t repeated in 2020 since many homeowners held off on putting their houses up for sale because of the pandemic (see graph below). In 2020, active listings peaked in April, and then fell off dramatically for the remainder of the year.

What’s happening this year?

Is the Number of Homes for Sale Finally Growing? | MyKCM

Due to the decline of active listings in 2020, 2021 began with record-low housing inventory counts. However, we’ve been building inventory over the last several months as more listings come to the market (see graph below):There are three main reasons we may see listings continue to increase throughout this fall and into the winter.

  1. Pent-up selling demand – Homeowners may be more comfortable putting their homes on the market as more and more Americans get vaccinated.
  2. New construction is starting to take off – Though new construction is not included in the realtor.com numbers, as more new homes are built, there will be more options for current homeowners to consider when they sell. The lack of options has slowed many potential sellers in the past.
  3. The end of forbearance will create some new listings – Most experts believe the end of the forbearance program will not lead to a wave of foreclosures for several reasons. The main reason is the level of equity homeowners currently have in their homes. Many homeowners will be able to sell their homes instead of going to foreclosure, which will lead to some additional listings on the market.

Bottom Line

If you’re in the market to buy a home, stick with it. There are new listings becoming available every day. If you’re thinking of selling your house, you may want to list your home before this additional competition comes to market.