🗓📊🏡December housing market update! Topics include supply/demand, inventory trends, new construction, interest rates, market time, recession, credit availability, and more!
Transcript:
It’s always more difficult to sell a home when you’re facing more competition. Inventory levels are still very low, so if you’re thinking of selling, now may be a great time. I’m Eric with Eric Andersen Homes, and this is your December, 2019 market update. As you can see in this first chart, we’re experiencing a significant inventory shortage when compared to last year. I have a number of buyers right now who can attest to this. They’re having a difficult time finding a great home, and we’ve found ourselves in several multiple offer situations. Demand is higher than supply, so if you’re thinking of selling, now’s a great time. And yet, there’s a misconception out there that there are actually more homes for sale than there are. 45% of homeowners think there is more inventory than there was last year, and 58% believe buyers have more options to choose from. Clearly, they aren’t out showing these buyers homes. If they were, or if they knew the data, they would know that’s false. The trouble with thinking there’s an abundance of inventory is that would make now a bad time to sell. But there’s less than you may think, and waiting until the market is more saturated with homes (as it always is in the spring) could lower the demand for your house. Most listings come on the market in the second quarter of the year, during April, May, and June. The dramatic increase we see at that time of year always makes for more competition among sellers. This next chart shows us what happened last year as we got into the spring market. In December through February, the total supply of inventory went as low as a 3.5 months’ supply. Once the spring market hit, that inventory went all the way up to a 4.3 months’ supply, which means sellers are competing with more sellers, and market times are higher. Plus, what else happens as the spring market rolls around? The builders start putting up more new construction. Permits for new construction are up 7.7% over where they were at this time last year. The economy is stronger, and there is definitely a need due to the inventory shortage. If builders could take advantage of this sellers’ market, they would be, but they have to wait until the spring when they can finish their work. But you don’t have to. The senior economist at realtor.com recently made the point that there are buyers out there, but they don’t have very many choices. Between the low inventory, low mortgage rates, and slower fall market, demand for homes remains strong. ShowingTime, a service which tracks buyer activity, reported a 4.6% increase in traffic since last year. So it’s not only that there are few homes for sale, there are also more buyers looking. This has also been true in my own experience. My listings were taking longer to sell this past spring, as there were more homes for sale and so my sellers were competing with more inventory. I put 7 different properties under contract between October 16 and November 19, many of which were homes that sat through the entire spring market. My favorite one is 12736 Wild Rye Ct. I had this listed in a subdivision where market times were over 550 days, and we got an offer in less than 30 days. Interestingly, there were a number of other units for sale in this subdivision, but having an advanced digital marketing strategy helped give us an edge over the competition. Two final points, one on interest rates and another on how the recession is expected to impact the housing market. As you can see, Freddie Mac expects rates to stay low (below 4%) through 2020, which means that as a buyer, you get more for your money and a lower payment. As for the recession, the economists are predicting continued appreciation in home prices over the next 3 years. The rate of appreciation is expected to drop, but this is normal in a healthy market. And the good news is, even with a slower rate of growth, we’re still talking about prices going up, not down. This is what has happened in 3 out of the last 5 recessions. Home values usually do not decrease during recessions. 2008 was an exception, since it was the housing crisis that triggered the recession. But in the 4 recessions prior to that, home values increased 3 out of 4 times, and they only decreased by less than 2% in 1991. What is expected to cause the next recession? Political factors and the stock market are at the top of the list. Housing is not expected to be a factor, coming in way down at #9. Sometimes I’ll hear people express concerns that we’re going back to 2008, that lending has become very lax and anybody can get a mortgage these days. That is simply not true. Here you can see data from the Mortgage Bankers Association showing how easily accessible credit is today, and while the line is going up, the increase has only been slight since 2008. Mortgages are nowhere near as accessible as they were in, say, 2006 and 2007. And again, anybody who thinks mortgages are easy to get today isn’t out there on the front lines working with buyers and trying to get their listings sold. I’ve had listings where a preapproved buyer come through with an offer, only not to get the loan 30 or 45 days later. It is still difficult to get a mortgage today, so any concerns about another housing bubble aren’t based on fact. I’m Eric with Eric Andersen Homes, and I’m here to provide you with a smarter approach to real estate.