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Ezra Bailey

New Homes Coming to the Housing Market This Year

Housing Market Update

The number of building permits issued for single-family homes is the best indicator of how many newly built homes will begin to come to market over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Construction Report, the number of building permits issued in January was 1,551,000. This is a 9.2% increase from December.

How will this impact buyers?

New inventory means more options. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explained how this is good news for the housing market – especially for those looking to buy:

“More construction will mean more housing inventory for consumers in the later months of this year…Spring months could still be quite tough for buyers since it takes time to convert housing starts into actual housing completions.”

How will this impact sellers?

More inventory means more competition. Yun continues to say:

“As trade-up buyers move into these newly completed homes in the near future, their existing homes will be released onto the market.”

Today, because of the tremendous lack of inventory, a seller can potentially anticipate:

  1. great sale price on their house as buyers engage in potential bidding wars.
  2. quick sale as buyers have little inventory to choose from.
  3. Fewer hassles as buyers want to smoothly secure a contract.

Bottom Line

If you’re considering selling your house, you’ll want to list sooner rather than later. This way, you’ll get ahead of this new competition coming to market and ensure the most attention toward your listing and the best price for your house.

Mother and daughter gardening together

Entry-Level Homeowners Are in the Driver’s Seat

Entry-Level Homeowners Are in the Driver’s Seat

One thing helping homeowners right now is price appreciation, especially in the entry-level market. In the latest Home Price Insights report, CoreLogic reveals how home prices increased by 4% year-over-year and project prices will rise 5.2% by December 2020.

Why is this good news for the homeowners?

When prices appreciate, homeowners gain equity. In addition, those planning to sell this year, especially in the entry-level market, can potentially earn a substantial profit.

Dr. Frank Nothaft, Chief Economist at CoreLogic, says:

“Moderately priced homes are in high demand and short supply, pushing up values…Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median.”

As Dr. Nothaft indicates, the lack of inventory continues to drive home price growth. This means there’s a high demand for homes in this tier of the market, making it a great time to consider using your equity to move up to a bigger or more premium home.

When you upgrade your home, you may be able to find the amenities or features you’ve dreamed of – such as a yard to plant or garden in with your family this spring, or more outdoor space for entertaining this summer. Maybe it’s the master bath you’ve always hoped for, or a garage to finally park your car inside.

Whatever you choose, if you’re moving out of an entry-level house, you’re likely going to be in the driver’s seat as a seller.

Bottom Line

If you’d like to own a bigger home, let’s get together to discuss your situation. You may be surprised by the current value of your home and the equity you’ve gained.

A group of four multi-ethnic seniors sitting together on patio furniture outdoors, talking and laughing. They are in retirement, relaxed and enjoying spending time with friends.

The Many Benefits of Aging in a Community

Aging in Place vs Aging in a Community

There’s comfort in being around people who share common interests, goals, and challenges. That comfort in a community doesn’t wane with age – it actually deepens. Whether it’s proudly talking about grandchildren or lamenting the fact that our eyes aren’t as good as they used to be, it helps to be around people who not only understand what we’re saying but actually feel the same joys and concerns as well.

That’s why many boomers are deciding to move into an active adult community. In the latest 55places National Housing Survey, they were described by one out of three seniors as an “outgoing, social community of likeminded people.”

Bill Ness, Chief Executive Officer and Founder of 55places.com, explains:

“Baby boomers are now reaching the age when moving to an active adult community is the ideal opportunity for them…Many boomers now want to downsize, experience a maintenance-free lifestyle, and pursue more social opportunities. It’s exciting that there are so many choices for baby boomers.”

There’s still a desire, however, among many seniors to “age-in-place.” According to the Senior Resource Guide, aging-in-place means:

“…that you will be remaining in your own home for the later years of your life; not moving into a smaller home, assisted living, or a retirement community etcetera.”

The challenge is, many seniors live in suburban or rural areas, and that often necessitates driving significant distances to see friends or attend other social engagements. A recent report from the Joint Center for Housing Studies of Harvard University (JCHS) titled Housing America’s Older Adults addressed this exact concern:

“The growing concentration of older households in outlying communities presents major challenges for residents and service providers alike. Single-family homes make up most of the housing stock in low-density areas, and residents typically need to be able to drive to do errands, see doctors, and socialize.”

The Kiplinger report also chimed in on this subject:

“While most seniors say they want to age in place, a much smaller percentage of them actually manage to accomplish it, studies show. Transportation is often a problem; when you can no longer drive, you can’t get to medical appointments or to other outings.”

Driving may not be a challenge right now, but think about what it may be like to drive 10, 20, or 30 years down the road.

There are also health challenges brought on by a possible lack of socialization when living at home versus a community of seniors. Sarah J. Stevenson is an author who writes about seniors. In a recent blog post for A Place for Mom, she explains:

“Social contacts tend to decrease as we age for reasons such as retirement, the death of friends and family, or lack of mobility.”

Thankfully, research from the same article suggests if you’re spending time with others in a community, thus reducing the impact of loneliness and isolation, there’s less of a risk of developing high blood pressure, obesity, heart disease, a weakened immune system, depression, anxiety, cognitive decline, Alzheimer’s disease, and early death.

Though the familiarity of our current home may bring a feeling of warmth, comfort, and convenience, it’s important to understand that staying there may mean missing out on crucial socialization opportunities. Living with adult children, joining a retirement community, or moving to an assisted living facility can help us continue to be with people we enjoy every day.

Bottom Line

“Aging-in-place” definitely has its advantages, but it could mean getting “stuck-in-place” too. There are many health benefits derived from socialization with a community of people that shares common interests. It’s important to take the need for human interaction into consideration when making a decision about where to spend the later years in life.

Young woman using laptop sat on tree trunk in fore

How the Housing Market Benefits with Uncertainty in the World

Should We Be Worried About the Housing Market?

It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,

“Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”

Is there a silver lining to this cloud of doubt?

Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.

Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,

“Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”

Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,

“The death toll from the coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”

The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:Popular Perspective Delivers Gift to U.S. Housing Market | MyKCMHow might concerns about global challenges impact the housing market in 2020? Fleming explains,

“Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”

Bottom Line

For a multitude of reasons, 2020 could be a challenging year. It seems, however, real estate will do just fine. As Fleming concluded in his report:

“Amid uncertainty, the house-buying power of U.S. consumers can benefit significantly.”

Open front door to classic style home.

The #1 Reason to List Your House Right Now

Should You List Now?

The success of the U.S. residential real estate market, like any other market, is determined by supply and demand. This means we need to look at how many potential purchasers are in the market versus the number of houses that are available to buy. With early 2020 housing data now rolling in, it’s quite evident there are two big stories impacting this year’s residential real estate market:

1. Buyer demand is already extremely strong
2. Housing supply is at a historically low level

Demand

ShowingTime is a firm that compiles data from property showings scheduled across the country. The latest ShowingTime Showing Index reveals how showings have increased in each of the country’s four regions for five months in a row.

Supply

Move.com also just released information indicating that the number of homes currently for sale has declined rapidly and now sits at the lowest level in almost a decade. They explained,

“National housing inventory declined 13.6 percent in January, the steepest year-over-year decrease in more than 4 years, pushing the supply of for sale homes in the U.S. to its lowest level since realtor.com began tracking the data in 2012.”

In response to these numbers, Danielle Hale, Chief Economist at realtor.com, said,

“Homebuyers took advantage of low mortgage rates and stable listing prices to drive sales higher at the end of 2019, further depleting the already limited inventory of homes for sale. With fewer homes coming up for sale, we’ve hit another new low of for sale-listings in January.”

The decrease in inventory impacted every price range, too. Here’s a graph showing the data released by move.com:The #1 Reason to List Your House Right Now | MyKCM

Bottom Line

Since there’s a historic shortage of homes for sale, putting your home on the market today could drive an excellent price and give you additional negotiating leverage when selling your house. Let’s get together to determine if listing your house now is your best move.

5 colored price sticker houses on the white background. Eps 10 vector file.

How Pricing Your Home Right Makes a Big Difference

Even though there’s a big buyer demand for homes in today’s low inventory market, it doesn’t mean you should price your home as high as the sky when you’re ready to sell. Here’s why making sure you price it right is key to driving the best price for the sale.

If you’ve ever watched the show “The Price Is Right,” you know the only way to win the game is to be the one to correctly guess the price of the item up for bid without going over. That means your guess must be just slightly under the retail price.

Pricing Your Home

When it comes to pricing your home, setting it at or slightly below market value will increase the visibility of your listing and drive more buyers your way. This strategy actually increases the number of buyers who will see your home in their search process. Why? When potential buyers look at your listing and see a great price for a fantastic home, they’re probably going to want to take a closer look. This means more buyers are going to be excited about your house and more apt to make an offer.

When this happens, you’re more likely to set up a scenario with multiple offers, potential bidding wars, and the ability to drive a higher final sale price. At the end of the day, even when inventory is tight, pricing it right – or pricing it to sell immediately – makes a big difference.

Here’s the other thing: homeowners who make the mistake of overpricing their homes will eventually have to lower the prices anyway after they sit on the market for an extended period of time. This leaves buyers wondering if the price drops were caused by something wrong with these homes when in reality, nothing was wrong, the initial prices were just too high.

Bottom Line

If you’re thinking about selling your home this year, let’s get together so you have a professional on your side to help you properly price your home and maximize demand from the start.

Korean girl looking under bed with flashlight

Where Have All the Houses Disappeared To?

Where are the houses for sale?

If you’re following what’s happening in the current housing market, you’ve seen how the lack of newly constructed homes is a major reason there’s a shortage of housing inventory available to today’s buyers. Another reason is that the inventory of existing homes for sale is shrinking. According to the most recent Existing Home Sales Report from the National Association of Realtors (NAR), sales are up 10.8% from the same time last year. That exceeds expectations and is great news.

The troubling news from the report is that the sold inventory is not being replaced. As NAR explained,

“Total housing inventory at the end of December totaled 1.40 million units, down 14.6% from November and 8.5% from one year ago. Unsold inventory sits at a 3.0-month supply at the current sales pace, down from the 3.7-month figure recorded in both November and December 2018. Unsold inventory totals have dropped for seven consecutive months from year-ago levels, taking a toll on home sales.”

The situation was also addressed in a recent Zillow article stating,

“The number of for-sale homes in the U.S. is at its lowest point in at least seven years, and the shortage appears poised to get worse before it gets better.”

Bill McBride of Calculated Risk further noted,

“Inventory always decreases sharply in December as people take their homes off the market for the holidays. However, based on the data I’ve collected, this was the lowest level for inventory in at least three decades (the previous low was 1.43 million in December 1993).”

Why is inventory falling so dramatically? I thought the housing market had softened.

A year ago, that was the case – but the market shifted again. Skylar Olsen, Director of Economic Research at Zillow, explains,

“A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back to accelerating growth right as we head into home shopping season with demand outpacing supply.”

What does this mean if you’re a homeowner thinking of selling?

Now is a great time to consider putting your home on the market. The competition (number of houses on the market) has not been this low in decades. It’s best not to wait for the inventory (both existing homes and new construction) to increase in the spring, as it always does.

Bottom Line

The supply of homes for sale is at a historic low. Buyer demand is surprisingly strong. Now would be a great time to sell.

Business people using tablet computers in meeting

Strength of the Economy Is Surprising the Experts

We’re currently in the longest economic recovery in U.S. history. That has caused some to ask experts to project when the next economic slowdown (recession) could occur. Two years ago, 67% of the economists surveyed by the Wall Street Journal (WSJ) for the Economic Forecasting Survey predicted we would have a recession no later than the end of this year (2020). The same study done just three months ago showed more than one-third of the economists still saw an economic slowdown right around the corner.

The news caused concern among consumers. This is evidenced by a recent survey done by realtor.com that shows 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur by the end of this year.

Wait! It seems the experts are changing their minds….

Now, in an article earlier this month, the Wall Street Journal (WSJ) revealed only 14.3% of those economists now believe we’re in danger of a recession occurring this year (see graph below):Strength of the Economy Is Surprising the Experts | MyKCM

The WSJ article strongly stated,

“The U.S. expansion, now in its 11th year, will continue through the 2020 presidential election with a healthy labor market backing it up, economists say.”

This optimism regarding the economy was repeated by others as well.

CNBC, quoting Goldman Sachs economists:

“Just months after almost everyone on Wall Street worried that a recession was just around the corner, Goldman Sachs said a downturn is unlikely over the next several years. In fact, the firm’s economists stopped just short of saying that the U.S. economy is recession-proof.”

Barron’s:

“When Barron’s gathers some of Wall Street’s best minds—as we do every January for our annual Roundtable—we expect some consensus, some disagreement…But the 10 veteran investors and economists who convened in New York on Jan. 6 at the Barron’s offices agree that there’s almost no chance of a recession this year.”

Washington Post:

“The U.S. economy is heading into 2020 at a pace of steady, sustained growth after a series of interest rate cuts and the apparent resolution of two trade-related threats mostly eliminated the risk of a recession.”

Robert A. Dye, Chief Economist at Comerica Bank:

“I expect that the U.S. economy will avoid a recession in 2020.”

Bottom Line

There probably won’t be a recession this year. That’s good news for you, whether you’re looking to buy or sell a home.

Toy house on a hand

How Buyers Can Win By Downsizing in 2020

Home values have been increasing for 93 consecutive months, according to the National Association of Realtors. If you’re a homeowner, particularly one thinking about downsizing living space, that’s great news, as you’ve likely built significant equity in your home.

Here’s some more good news: mortgage rates are expected to remain low throughout 2020 at an average of 3.8% for a 30-year fixed-rate loan.

The combination of leveraging your growing equity and capitalizing on low rates could make a big difference in your housing plans this year.

How to Use Your Home Equity

For move-up buyers, the typical pattern for building financial stability and wealth through homeownership works this way: you buy a house and gain equity over several years of mortgage payments and price appreciation. You then take that equity from the sale of your house to make a down payment on your next home and repeat the process.

For homeowners ready to downsize, home equity can work in a slightly different way. What you choose to do depends in part upon your goals.

According to HousingWire.com, for some, the desire to downsize may be related to retirement plans or children aging out of the home. Others may be choosing to live in a smaller home to save money or simplify their lifestyle in a space that’s easier to clean and declutter. The reasons can vary greatly and by generation.

Those who choose to put their equity toward a new home have the opportunity to make a substantial down payment or maybe even to buy their next home in cash. This is incredibly valuable if your goal is to have a minimal mortgage payment or none at all.

A local real estate professional can help you evaluate your equity and how to use it wisely. If you’re planning to downsize, keep in mind that home prices are anticipated to continue rising in 2020, which could influence your choices.

The Impact of Low Mortgage Rates

Low mortgage rates can offset price hikes, so locking in while rates are low will be key. For many downsizing homeowners, a loan with a shorter term is ideal, so the balance can be reduced more quickly.

Interest rates on 10, 15, and 20-year loans are lower than the rates on a 30-year fixed-rate loan. If you’re downsizing your housing costs, you may prefer a shorter-term loan to pay off your home faster. This way, you can save thousands in interest payments over time.

Bottom Line

If you’re planning a transition into a smaller home, the twin trends of low mortgage rates and rising home equity can kickstart or boost your plans, especially if you’re anticipating retirement soon or just want to live in a smaller home that’s easier to maintain. Let’s get together today to explore your options.