This Week in Real Estate
Good Morning!
While the debate among economists and prognosticators continue as
to the near-term future of the housing market, the data, the most valuable
currency in business, suggests the environment today is nothing like it was
leading up to or during the period known as the “Great Recession” of 2008 -
2012. One of the key reasons why the current market will not experience the
same results of that period is the undersupply of homes for sale. While
inventory is up 27.8% compared to the same week last year, compared to the same
week in 2019 there are 42.6% fewer homes for sale, meaning inventory is still
historically low. Realtor.com economist, Jiayi Xu, reported This Week in
Real Estate that this week marks the seventh straight week of
year-over-year declines in the number of new listings and a second consecutive
week of double-digit declines. For the week ending August 20, the number of new
listings dropped by 12% from a year earlier. Ironically, prices continue to
climb. For the week ending August 20, home prices increased by 14.4% over the
same time period last year. Below are a few newsworthy events from the
fourth week of August that influence our business:
* NAR: Contract
Signings, Down Again, May Have Hit Bottom. Home buyers continue to
recoil from higher mortgage rates and home prices, with pending home sales in
July plummeting nearly 20% year over year, according to data from the
National Association of Realtors released Wednesday. Pending home sales have fallen in eight of the last nine months
as the market retreats from its pandemic highs. Still, NAR Chief Economist
Lawrence Yun says a turnaround is likely. “In terms of the current housing
cycle, we may be at or close to the bottom in contract signings,” he says.
“This month’s very modest decline reflects the recent retreat in mortgage
rates. Inventories are growing for homes in the upper price ranges, but limited
supply at the lower price points is hindering transaction activity.”
Affordability is taking a big hit, too, plunging in June to its lowest level
since 1989, NAR reports. “Home prices are still rising by double-digit
percentages year over year, but annual price appreciation should moderate to
the typical rate of 5% by the end of this year and into 2023,” Yun says. “With
mortgage rates expected to stabilize near 6% alongside steady job creation,
home sales should start to rise by early next year.”
Full Story… https://magazine.realtor/daily-news/2022/08/24/nar-contract-signings-down-again-may-have-hit-bottom
* Economists Have a
Strange New Buzzword For The Housing Market That Will Shock Buyers and Sellers.
The housing market has been called
plenty of things this summer: red-hot, insane, brutal.
But the latest word du jour to describe the state of real
estate today is almost shocking in its tepidness: balanced. This term cropped up most recently in an analysis
by Realtor.com economist Jiayi
Xu, who notes, “Our weekly data suggests
that the U.S. housing market keeps progressing toward a more balanced market.”
But what does a balanced housing market actually
look like - and mean - for buyers and sellers? In a nutshell, “balance” means that the raging seller’s
market that’s dominated since the COVID-19
pandemic is slowly shifting - not
into full buyer’s market territory,
but toward a middle ground that puts buyers and sellers on more even footing.
Over the past two years, the pace of
real estate sales has sped up significantly.
Nationally, homes are on the market a median 35 days before getting snapped up.
But this rush is waning. For the week ending Aug. 20, properties spent four
extra days on the market compared with this time last year. “For a fourth week in a row, homes are sitting on the
market for a longer time than last year,” adds Xu. “As both buyers and sellers
adjust to the rebalancing market, expectations shift, reducing the sense of
urgency in the market and reinforcing the trend toward longer sale timelines.”
“This week marks a seventh straight week of
year-over-year declines in the number of new listings coming up for sale, and a
second consecutive week with double-digit declines,” notes Xu. For the week ending Aug. 20, the number of new
listings dropped by 12% from a year earlier. The deep irony in listing skittishness is this: Sellers still stand to
make bank, since home prices continue to soar through the roof. Currently, property asking prices clock in at a median
of $449,000 nationwide. And for the
week ending Aug. 20, home prices shot up by 14.4% over that same time period
last year. To give you a sense of how far
this sum has come, prices have climbed by double-digit percentages
for 36 weeks straight. As Xu points out, “Home equity remains
at a record high.”
Full Story…
https://www.realtor.com/news/trends/column-weekly-housing-update-20-august-buzzword/
* Why Today’s
Housing Inventory Proves The Market Isn’t Headed For a Crash. Whether or not you owned a home in 2008, you likely remember
the housing crash that took place back then. And news about an economic
slowdown happening today may bring all those
concerns back to the surface. While those feelings are understandable, data can
help reassure you the situation today is nothing like it was in 2008. One of
the key reasons why the market won’t crash this time is the current undersupply of inventory. For the market to
crash, you’d have to make a case for an oversupply of inventory headed to the
market, and the numbers just don’t support that. Even though housing
supply is increasing this year, there’s still a
limited number of existing homes available. Based on the latest weekly data, inventory is up 27.8% compared to the same week last
year. But compared to the same week in 2019, it’s still
down by 42.6%. So, what does this mean? Inventory is still historically
low. There simply aren’t enough homes on the market to cause prices
to crash. There’s also a lot of talk about what’s happening with newly built
homes today, and that may make you wonder if we’re overbuilding. But home
builders are actually slowing down their production right now. It’s a sign they’re being intentional about not
overbuilding homes like they did during the bubble. And according to the latest data from the U.S. Census, at today’s current pace, we’re headed to build
a seasonally adjusted annual rate of about 1.4 million homes this year. While this will add more inventory to
the market, it’s not on pace to create an oversupply because builders today are
more cautious than the last time when they built more homes than the market
could absorb. Although housing supply is growing this year, the market
certainly isn’t anywhere near the inventory levels that would cause prices to
drop significantly. That’s why inventory tells us the housing market won’t
crash.
Have a
productive week.
Jason
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