Everything Else • June 17, 2020

Three Reasons Homebuyers Are Ready to Purchase This Year

by Tara Jo Hayes

Three Reasons Homebuyers Are Ready to Purchase This Year

A recent survey by Lending Tree tapped into behaviors of over 1,000 prospective buyers. The results indicated 53% of all homebuyers are more likely to buy a home in the next year, even amid the current health crisis. The survey further revealed why, naming several reasons buyers are more likely to move this year (see graph below):Let’s break down why these are a few of the key factors motivating buyers to actively engage in the home search process, and the corresponding wins for sellers as well.

1. Low Mortgage Rates

The biggest reason potential homebuyers indicated they’re eager to purchase this year is due to current mortgage rates, which are hovering near all-time lows. Today’s low rates are making it more affordable than ever to buy a home, which is a huge incentive for purchasers. In fact, 67% of respondents in the Lending Tree survey want to take advantage of low mortgage rates. This is no surprise when comparing historic mortgage rates by decade (see below):Sam Khater, Chief Economist at Freddie Mac recently said:

“As the economy is slowly rebounding, all signs continue to point to a solid recovery in home sales activity heading into the summer as prospective buyers jump back into the market. Low mortgage rates are a key factor in this recovery.”

2. Reduced Spending

Some people have also been able to save a little extra money over the past few months while sheltering in place. One of the upsides of staying home recently is that many have been able to work remotely and minimize extra spending on things like commuting expenses, social events, and more. For those who fall into this category, they may have a bit more saved up for down payments and closing costs, making purchasing a home more feasible today.

3. Re-Evaluating Their Space

Spending time at home has also given buyers a chance to really evaluate their living space, whether renting or as a current homeowner. With time available to craft a wish list of what they really need in their next home, from more square footage to a more spacious neighborhood, they’re ready to make it happen.

What does this mean for buyers and sellers?

With these three factors in play, the demand for housing will keep growing this year, especially over the summer as more communities continue their phased approach to reopening. Buyers can take advantage of additional savings and low mortgage rates. And if you’re thinking of selling, know that your home may be in high demand as buyer interest grows and the number of homes for sale continues to dwindle. This may be your moment to list your house and make a move into a new space as well.

Bottom Line

If you’re ready to buy or sell – or maybe both – let’s connect to put your plans in motion. With low mortgage rates leading the way, it’s a great time to take advantage of your position in today’s market.

Everything Else • June 17, 2020

Real Estate Tops Best Investment Poll for 7th Year Running

by Tara Jo Hayes

Real Estate Tops Best Investment Poll for 7th Year Running

Every year, Gallup conducts a survey of Americans to determine their choice for the best long-term investment. Respondents are asked to select real estate, stocks/mutual funds, gold, savings accounts/CDs, or bonds.

For the seventh year in a row, real estate has come out on top as the best long-term investment. Gallup explained:

“Real estate remains the most favored investment to Americans, as has been the case since 2013, when the housing market was on the rebound. More than a third of Americans have named real estate as the top investment since 2016.”

This year’s results indicated 35% of Americans chose real estate, followed by stocks at 21%. The full results covering the last decade are shown in the chart below:

Bottom Line

The belief of the American people in the stability of housing as a long-term investment remains strong, even through the many challenges our economy faces today.

Everything Else • June 3, 2020

Home Prices: It’s All About Supply & Demand

by Tara Jo Hayes

Home Prices: It’s All About Supply and Demand

As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of what’s to come.

Making our way through the month of June and entering the second half of the year, we face an undersupply of homes on the market. Keep in mind, this undersupply is going to vary by location and by price point. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Robert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

Given the undersupply of homes on the market today, there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process. According to a recent MarketWatch article:

“As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.”

In addition, experts forecasting home prices have updated their projections given the impact of the pandemic. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.

Bottom Line

Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale.

Everything Else • June 1, 2020

The Benefits of Homeownership May Reach Further than You Think

by Tara Jo Hayes

The Benefits of Homeownership May Reach Further Than You Think

More than ever, our homes have become an integral part of our lives. Today they are much more than the houses we live in. They’re evolving into our workplaces, schools for our children, and safe havens that provide shelter, stability, and protection for our families through the evolving health crisis. Today, 65.3% of Americans are able to call their homes their own, a rate that has risen to its highest point in 8 years.

June is National Homeownership Month, and it’s a great time to reflect on the benefits of owning your own home. Below are some highlights and quotes recently shared by the National Association of Realtors (NAR). From non-financial to financial, and even including how owning a home benefits your local economy, these items may give you reason to think homeownership stretches well beyond a sound dollars and cents investment alone.

Non-Financial Benefits

Owning a home brings families a sense of happiness, satisfaction, and pride.

Pride of Ownership: It feels good to have a place that’s truly your own, especially since you can customize it to your liking. “The personal satisfaction and sense of accomplishment achieved through homeownership can enhance psychological health, happiness and well-being for homeowners and those around them.”
Property Maintenance and Improvement: Your home is your stake in the community, and a way to give back by driving value into your neighborhood.
Civic Participation: Homeownership creates stability, a sense of community, and increases civic engagement. It’s a way to add to the strength of your local area.

Financial Benefits

Buying a home is also an investment in your family’s financial future.

Net Worth: Homeownership builds your family’s net worth. “The median family net worth for all homeowners ($231,400) increased by nearly 15% since 2013, while net worth ($5,000) actually declined by approximately 9% since 2013 for renter families.”
Financial Security: Equity, appreciation, and predictable monthly housing expenses are huge financial benefits of homeownership. Homeownership is truly the best way to improve your long-term net worth.

Economic Benefits

Homeownership is even a local economic driver.

Housing-Related Spending: An economic force throughout our nation, housing-related expenses accounted for more than one-sixth of the country’s economic activity over the past three decades.
GDP Growth: Homeownership also helps drive GDP growth as the country aims to make an economic rebound. “Every 10% increase in total housing market wealth would translate to approximately $147 billion in additional consumer spending, or 0.8% of GDP, as well as billions of dollars in new federal tax revenue.”
Entrepreneurship: Homeownership is even a form of forced savings that provides entrepreneurial opportunities as well. “Owning a home enables new entrepreneurs to obtain access to credit to start or expand a business and generate new jobs by using their home as collateral for small business loans.”

Bottom Line

The benefits of homeownership are vast and go well beyond the surface level. Homeownership is truly a way to build financial freedom, find greater satisfaction and happiness, and make a substantial impact on your local economy. If owning a home is part of your dream, let’s connect today so you can begin the homebuying process.

Everything Else • May 28, 2020

Why This Summer Is the 2020 Real Estate Season

by Tara Jo Hayes

Why This Summer Is the 2020 Real Estate Season

With stay-at-home orders starting to gradually lift throughout parts of the country, data indicates homebuyers are jumping back into the market. After many families put their plans on hold due to the COVID-19 pandemic, what we once called the busy spring real estate season is shifting into the summer. In 2020, summer is the new spring for real estate.

Joel Kan, Economist at The Mortgage Bankers Association (MBA) notes:

“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks…Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”

Additionally, according to Google Trends, which scores search terms online, searches for real estate increased from 68 points the week of March 15^th to 92 points last week. As we can see, more potential homebuyers are looking for homes virtually.

What’s the Opportunity for Buyers?

Another reason buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is historically low mortgage rates. Sam Khater, Chief Economist at Freddie Mac indicates:

“For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, giving potential buyers a good reason to continue shopping even amid the pandemic…As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago.”

With mortgage rates at such low levels and states gradually beginning to reopen, there’s more incentive than ever to buy a home this summer.

What’s the Opportunity for Sellers?

Finding a home to buy, however, is still a challenge, as this spring sellers removed many listings from the market. Though more people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level.

According to last week’s Weekly Economic and Housing Market Update from realtor.com:

“Weekly Housing Inventory showed continued tightening. New Listings declined 28% compared with a year ago, as sellers grappled with uncertainty and hesitated bringing homes to market. Total Listings dropped 20% YoY, a faster rate than in prior weeks, leaving very few homes available for sale. As Time on Market was 15 days slower YoY, asking prices moved up 1.5% YoY.”

If you’re thinking of selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this season may be the time for your house to stand out from the crowd. Trusted real estate professionals can help you list safely and effectively, keeping your family’s needs top of mind. Buyers are looking, and your house may be at the top of their list.

Bottom Line

If you’re thinking of selling, many buyers may be eager to find a home just like yours. Let’s connect today to make sure you can get your house in on the action this summer.

Everything Else • May 21, 2020

Housing Market Positioned to Bring Back the Economy

by Tara Jo Hayes

Housing Market Positioned to Bring Back the Economy

All eyes are on the American economy. As it goes, so does the world economy. With states beginning to reopen, the question becomes: which sectors of the economy will drive its recovery? There seems to be a growing consensus that the housing market is positioned to be that driving force, the tailwind that is necessary. Some may question that assertion as they look back on the last recession in 2008 when housing was the anchor to the economy – holding it back from sailing forward. But even then, the overall economy did not begin to recover until the real estate market started to regain its strength. This time, the housing market was in great shape when the virus hit. As Mark Fleming, Chief Economist of First American, recently explained:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

Fleming is not the only economist who believes this. Last week, Dr. Frank Nothaft, Chief Economist for CoreLogic, (@DrFrankNothaft) tweeted:

“For the first 6 decades after WWII, the housing sector led the rest of the economy out of each recession. Expect it to do so this time as well.”

And, Robert Dietz, Chief Economist for the National Association of Home Builders, in an economic update last week explained:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt…Based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

Bottom Line

Every time a home is sold it has a tremendous financial impact on local economies. As the real estate market continues its recovery, it will act as a strong tailwind to the overall national economy.

Everything Else • May 18, 2020

#1 Financial Benefit of Homeownership: Family Wealth

by Tara Jo Hayes

#1 Financial Benefit of Homeownership: Family Wealth

While growing up, we were taught by our parents and grandparents that owning a home is a financially savvy move. They explained how a mortgage is like a “forced savings plan.” When you pay rent, that money is lost forever. When you make a mortgage payment, much of that money accumulates as equity in the home. So, what exactly is equity? The equity in your home is the amount of money you can sell it for minus what you still owe on the mortgage. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity. A recent study by CoreLogic explained that homeowners gained substantial equity over the last twelve months, and are essentially sitting on large sums of cash in their homes. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:

“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth. The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”

For most families, their home is their largest financial asset. This increase in equity drives the net worth, or family wealth, of the homeowner. Renters are not earning that benefit. Instead, they’re building the net worth of their landlord.

Bottom Line

Home price growth will moderate during the pandemic. But once a cure is available, most experts agree that home values will again begin to appreciate at levels similar to what we’ve seen over the last several years. In the long run, our family elders will be proven correct: owning a home is a savvy financial move.

Everything Else • May 15, 2020

What If I Need To Sell My Home Now?

by Tara Jo Hayes

What If I Need to Sell My Home Now? What Can I Do?

Every day that passes, people have a need to buy and sell homes. That doesn’t stop during the current pandemic. If you’ve had a major life change recently, whether with your job or your family situation, you may be in a position where you need to sell your home – and fast. While you probably feel like timing with the current pandemic isn’t on your side, making a move is still possible. Rest assured, with technology at your side and fewer sellers on the market in most areas, you can list your house and make it happen safely and effectively, especially when following the current COVID-19 guidelines set forth by the National Association of Realtors (NAR) and the Centers for Disease Control and Prevention (CDC). You may have a new baby, a new employment situation, a parent who moved in with you, you just built a home that’s finally ready to move into, or some other major part of your life that has changed in recent weeks. Buyers have those needs too, so rest assured that someone is likely looking for a home just like yours. According to the NAR Flash Survey: Economic Pulse taken April 5 – 6, real estate agents indicate, not surprisingly, that there’s a noticeable decline in current homebuyer interest. That said, 10% of agents said in the same survey that they saw no change or even an increase in buyer activity. So, while buyer interest is low compared to normal spring markets, there are still buyers in the market. Don’t forget, you only need one buyer – the right one for your home. Here’s the other thing – people are spending a lot of time on the Internet right now, given the stay-at-home orders implemented across the country. Buyers are actively looking at homes for sale online. Some of them are reaching out to real estate professionals for virtual tours and getting ready to make offers too. Homes are being sold in many markets.

There Is Less Competition Right Now

The same survey indicates that 56% of NAR members said sellers are removing their homes from the market right now. This can definitely work in your favor. If other sellers are removing their listings, your home has a better chance of rising to the top of a buyer’s search list and being seen. Keep in mind, listings will pick up again soon, as 57% of the respondents note that sellers are only planning to delay the process by a couple of months. If you need to sell right now, don’t wait for the competition to get back into the market again. This year, delayed listings from the typically busy spring season will push into the summer months, so more competition will be coming to the market as the pandemic passes. Getting ahead of that wave now might be your biggest opportunity.

Your Trusted Real Estate Advisor Can Help

Real estate agents are working hard every single day under untraditional circumstances, utilizing technology to help both buyers and sellers who need to continue with their plans. We’re using virtual tours to show homes currently on the market, staying connected with the buyers and sellers through video chats, and leveraging resources to complete transactions electronically. We’re making sure the families we support remain safe and can keep their real estate needs on track, especially as life is changing so rapidly.

Bottom Line

Homes are still being bought and sold in the midst of this pandemic. If you need to sell your house and would like to know the current status in our local market, let’s work together to create a safe and effective plan that works for you and your family.

Everything Else • May 14, 2020

Unemployment Report

by Tara Jo Hayes

Unemployment Report: No Need to Be Terrified

Last Friday, the Bureau of Labor Statistics (BLS) released its latest jobs report. It revealed that the economic shutdown made necessary by COVID-19 caused the unemployment rate to jump to 14.7%. Many anticipate that next month the percentage could be even higher. These numbers represent the extreme hardship so many families are experiencing right now. That pain should not be understated. However, the long-term toll the pandemic will cause should not be overstated either. There have been numerous headlines claiming the current disruption in the economy is akin to the Great Depression, and many of those articles are calling for total Armageddon. Some experts are stepping up to refute those claims. In a Wall Street Journal (WSJ) article this past weekend, Josh Zumbrun, a national economics correspondent for the Journal explained:

“News stories often describe the coronavirus-induced global economic downturn as the worst since the Great Depression…the comparison does more to terrify than clarify.”

Zumbrun goes on to explain:

“From 1929 to 1933, the economy shrank for 43 consecutive months, according to contemporaneous estimates. Unemployment climbed to nearly 25% before slowly beginning its descent, but it remained above 10% for an entire decade…This time, many economists believe a rebound could begin this year or early next year.”

Here is a graph comparing current unemployment numbers (actual and projected) to those during the Great Depression:Clearly, the two unemployment situations do not compare.

What makes this time so different?

This was not a structural collapse of the economy, but instead a planned shutdown to help mitigate the virus. Once the virus is contained, the economy will immediately begin to recover. This is nothing like what happened in the 1930s. In the same WSJ article mentioned above, former Federal Reserve Chairman Ben Bernanke, who has done extensive research on the depression in the 1930s, explained:

“The breakdown of the financial system was a major reason for both the Great Depression and the 2007-09 recession.” He went on to say that today – “the banks are stronger and much better capitalized.”

What about the families and small businesses that are suffering right now?

The nation’s collective heart goes out to all. The BLS report, however, showed that ninety percent of the job losses are temporary. In addition, many are getting help surviving this pause in their employment status. During the Great Depression, there were no government-sponsored unemployment insurance or large government subsidies as there are this time. Today, many families are receiving unemployment benefits and an additional $600 a week. The stimulus package is helping many companies weather the storm. Is there still pain? Of course. The assistance, however, is providing much relief until most can go back to work.

Bottom Line

We should look at the current situation for what it is – a predetermined pause placed on the economy. The country will recover once the pandemic ends. Comparisons to any other downturn make little sense. Bernanke put it best:

“I don’t find comparing the current downturn with the Great Depression to be very helpful. The expected duration is much less, and the causes are very different.”

Everything Else • May 12, 2020

Economic Recovery

by Tara Jo Hayes

Confused About the Economic Recovery? Here’s Why.

As we continue to work through the health crisis that plagues this country, more and more conversations are turning to economic recovery. While we look for signs that we’ve reached a plateau in cases of COVID-19, the concern and fear of what will happen as businesses open up again is on all of our minds. This causes confusion about what an economic recovery will look like. With this in mind, it’s important to understand how economists are using three types of sciences to formulate their forecasts and to work toward clearer answers.

Business Science – How has the economy rebounded from similar slowdowns in the past?
Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?
People Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

Sam Khater, Chief Economist at Freddie Mac, says:

“Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020.”

This past week, the Bureau of Economic Analysis released the advanced estimate for Gross Domestic Product (GDP) for the first quarter of 2020. That estimate came in at -4.8%. It was a clear indicator showing how the U.S. economy slowed as businesses shut down and consumers retreated to their homes in fear of the health crisis and of contracting COVID-19.Experts agree that the second quarter of 2020 will be an even greater slowdown, a sign more businesses are feeling the effects of this health crisis. The same experts, however, project businesses will rebound, and a recovery will start to happen in the second half of this year.

Bottom Line

As time goes on, we’ll have more clarity around what the true economic recovery will look like, and we’ll have more information on the sciences that will affect it. As the nation’s economy comes back to life and businesses embrace new waves of innovation to serve their customers, the American spirit of grit, growth, and prosperity will be alive and well.