There’s an old adage in real estate: location, location, location. But ever since the Federal Reserve began its series of inflation-fighting interest rate hikes last year, a new mantra has emerged: mortgage rates, mortgage rates, mortgage rates.

Higher rates had the immediate impact of dampening homebuyer affordability and demand. But this year, we’re seeing further repercussions. While analysts expected listing inventory to swell as sales declined, instead, homeowners have been pushing off plans to sell because they feel beholden to their existing, lower mortgage rates.

So what impact is this reduced demand and low supply environment having on home values? And what can we expect from the real estate market in the coming months and years? Here are several key indicators that help to paint a picture of the current market and where it’s likely headed.

HOME SALES ARE EXPECTED TO PICK UP BY EARLY NEXT YEAR

The weather isn’t the only thing that heats up in the spring and summer. Nationally, it tends to be the busiest time in real estate. But this year, the peak season got off to a slow start, with sales declines in both March and April.^1,2 Existing home sales in April were down 3.4% from the previous month—and 23.2% from a year earlier.²

What’s causing this market slowdown? Industry experts attribute it to several factors, including near-record home prices, high mortgage rates, and low inventory.

According to National Association of Realtors (NAR) Chief Economist Lawrence Yun, “Home sales are trying to recover and are highly sensitive to changes in mortgage rates. Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”¹

However, some industry experts believe the market is poised for a comeback. Forecasters at the Mortgage Bankers Association (MBA) predict that home sales will continue to fall through Q3 before rising in Q4 and throughout next year.³  Analysts at Fannie Mae expect the recovery to take a bit longer, picking up in early 2024.

Meanwhile, home builder confidence is already up, as purchases of new single-family homes surged in March and April to a 13-month high.⁵ Builder incentives are helping to boost sales: According to the National Association of Home Builders, in May, 54% reported using them to win over budget-conscious buyers.⁶

What does it mean for you?  A slower pace of sales has given buyers some breathing room. If you hated the frenzy of the pandemic-era real estate market, now might be a better time for you to shop for a home. We can help you evaluate your options and make an informed purchase.

If you plan to sell your home, prepare yourself for less foot traffic and a longer sales timeline than you may have found a year ago. It will also be crucial to enlist the help of a skilled agent who knows how to draw in buyers. Reach out for a copy of our multi-step Property Marketing Plan.

PROPERTY VALUES REMAIN RELATIVELY STABLE

Some good news for buyers: While home builder sales climbed in April, the median new-house price fell to $420,800, an 8.2% decrease from a year ago.⁵ Meanwhile, the median existing-home price dropped to $388,800, down 1.7% year-over-year. Notably, existing-home prices rose in parts of the country but fell in the South and West.² 

“Roughly half of the country is experiencing price gains,” explains Yun. “Multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent.”²

The average national home price remains about 40% higher than it was in early 2020, according to the S&P CoreLogic Case-Shiller index.⁷ A tight housing supply has helped to buoy prices amidst a slowdown in sales.

“While it varies from region to region, home prices at the national level may fall 1% or 1.5% by the end of the year, so not much,” Doug Duncan, senior vice president and chief economist at Fannie Mae, told Yahoo Finance in April.⁸

Record levels of home equity will help to stabilize the sector and prevent a wave of foreclosures, even as prices moderate, according to Mark Zandi, chief economist at Moody’s Analytics.⁹

“But for those who have owned a home for more than a year or two, their home will remain a rock-solid investment. And once affordability is restored, the next generation of households can become homeowners. Getting there is critical to the financial well-being of those households, their communities, and the broader economy,” writes Zandi in The Washington Post.⁹

What does it mean for you?  Prices have softened in certain market segments—and motivated sellers are out there and willing to make deals. We can help you find your next home and negotiate a great price.

If you’re a homeowner, the surge in home values has slowed, but you’re likely still sitting on a nice pile of equity. Reach out for a free assessment to find out how much your home is currently worth.

LISTING INVENTORY IS LOW, BUT NEW CONSTRUCTION IS ON THE RISE

Unsold existing home inventory rose 7.2% from March to April, according to NAR. At the current level of demand, this equates to 2.9 months of supply, which is still well below the 5 to 6 months of inventory required for a “balanced” market.²

Inventory remains tight despite the market slowdown because many would-be sellers are reluctant to give up their lower mortgage rates. “Affordability is not only an issue for first-time homebuyers, but also for many repeat buyers who still need to take on a mortgage,” explains Danielle Hale, chief economist for Realtor.com.¹⁰

In a recent survey by the home listing site, 82% of respondents who are planning to both buy and sell a home said they feel “locked in” by their low rate.¹¹

In some areas, new home construction is helping to fill the supply gap. “Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10%,” according to National Association of Home Builders Chief Economist Robert Dietz.¹²

And more new homes are in the pipeline, after a builder slowdown last year. Single-family housing starts rose 1.6% from March to April (seasonally adjusted) and new construction permits hit a seven-month high.¹³

What does it mean for you?  Inventory remains tight, but less competition means more choice and negotiating power for buyers. If you’ve had trouble finding a home in the past, it may be time to take another look. We can help you explore both new and existing homes in our area.

Sellers are enjoying reduced competition right now, as well. However, the longer you wait to list, the more competition you’re likely to face. And if you feel locked in by your current, lower mortgage rate, consider this: If you roll your equity gains into a down payment on your next home, you could possibly lower your monthly payment. Reach out to discuss your options.

MORTGAGE RATES MAY FINALLY COME DOWN

According to Freddie Mac, the average 30-year fixed-rate mortgage hit a peak of 7.08% in the fourth quarter of 2022, and since then it’s primarily floated between 6 and 7%.¹⁴ However, there are signs that rates could trend lower later this year.

“Calmer inflation means lower mortgage rates, eventually,” Yun predicted in a recent statement. “Mortgage rates slipping down to under 6% looks very likely toward the year’s end.”¹⁵

Other leading economists agree. In its May forecast, Fannie Mae speculates that 30-year fixed mortgage rates will continue to decline, averaging 6.0% in Q4 2023 and 5.4% by Q4 2024.⁴ Meanwhile, the MBA predicts rates will fall even faster, averaging 5.6% by Q4 2023 and 4.8% by Q4 2024.³

On May 3, the Federal Reserve raised its benchmark borrowing rate by another quarter point—its 10th consecutive increase since March 2022. However, in its corresponding statement, the Fed omitted language from its previous release about “additional policy firming,” leaving many analysts to speculate that the rate hikes may be over.¹⁶

Although mortgage rates aren’t directly tied to the federal funds rate, a decision by the Fed to pause rate increases could have a positive effect. In the meantime, buyers should shop around multiple lenders to find the best rate—and buckle up for what could be an exciting ride.

What does it mean for you?  Mortgage rates may finally trend down, which would be great news for buyers. But, a decrease in rates could correspond with an increase in competition and prices. If you start searching now, you’ll be prepared to make an offer when the time is right. We can help you negotiate a great deal and potential seller incentives.

If you’re planning to sell, this is good news for you, too. But, there are several factors to consider when determining the right time to list your home. Reach out for a consultation so we can help you chart the best course.

WE’RE HERE TO GUIDE YOU

While national real estate forecasts can provide a “big picture” outlook, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighborhood. 

If you’re considering buying or selling a home, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources:

1. National Association of Realtors –
   https://www.nar.realtor/newsroom/existing-home-sales-slid-2-4-in-march
2. National Association of Realtors –
   https://www.nar.realtor/newsroom/existing-home-sales-faded-3-4-in-april
3. Mortgage Bankers Association –
   https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/2023/mortgage-finance-forecast-may-2023.pdf?sfvrsn=4bf1d1a7_1
4. Fannie Mae –
   https://www.fanniemae.com/media/47006/display
5. U.S. Census Bureau –
   https://www.census.gov/construction/nrs/current/index.html
6. National Association of Home Builders –
   https://www.nahb.org/news-and-economics/press-releases/2023/05/lack-of-existing-inventory–boosts-builder-confidence-to-key-marker
7. New York Times –
   https://www.nytimes.com/2023/04/29/business/spring-housing-market.html?
8. Yahoo Finance –
   https://finance.yahoo.com/news/mortgage-rates-increase-after-weeks-of-declines-160015631.html
9. The Washington Post –
   https://www.washingtonpost.com/business/2023/04/22/housing-prices-put-some-out-of-the-market/
10. CNBC –
    https://www.cnbc.com/2023/04/20/home-sales-fell-in-march-amid-volatility-in-mortgage-rates.html
11. Realtor.com –
    https://www.realtor.com/research/2023-q1-sellers-survey-btts/
12. National Association of Home Builders –
    https://www.nahb.org/news-and-economics/press-releases/2023/04/lack-of-existing-inventory-continues-to-support-builder-sentiment
13. United State Census Bureau –
    https://www.census.gov/construction/nrc/pdf/newresconst.pdf
14. Freddie Mac –
    https://www.freddiemac.com/pmms
15. National Association of Realtors –
    https://www.nar.realtor/blogs/economists-outlook/instant-reaction-inflation-april-12-2023
16. CNBC –
    https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html

To avoid buyer’s remorse, consider your future self when shopping for a home. 

Most new homebuyers don’t regret becoming homeowners. In fact, according to a survey by LendingTree, 80% of recent buyers who successfully overcame a challenging housing market say they’re glad they found their current homes.¹ But that doesn’t mean newly-minted homeowners don’t have any regrets about their buying choices. 

On the contrary, research shows that even the most satisfied homeowners would change some aspects of their home purchase if given the opportunity. According to a recent survey by Anytime Estimate, nearly 3 out of 4 buyers who purchased a home in 2021 or 2022 still have a few regrets.² 

Some question their decision to move to a neighborhood they still don’t love. Others wish they had been less picky about where they lived so they could have paid less. Many are afraid they overspent or think they sacrificed too much in their rush to buy a home. 

Here are some of the most common homebuyer regrets we see, along with our professional advice on avoiding them.

REGRET #1: Spending More Than Necessary 

No one wants to overpay for their new home purchase (and, luckily, with the right guidance, doing so is avoidable). But even if you’ve secured a winning purchase price, there are still plenty of ways to overspend accidentally. 

One of the most common ways to overpay? Choose the wrong mortgage. In fact, this can be one of the riskiest mistakes a new buyer can make in today’s higher-rate environment. 

According to a recent survey, nearly three-quarters of homebuyers leave money on the table by not bothering to shop around for the best rate.³ And research by LendingTree suggests that buyers in major metro areas lose an average of $63,151 over the life of their loan just by picking the first mortgage they’re offered.⁴

Lesson Learned:  As long as you stick to what you can afford, buying a home can be a boon for your financial health. The longer you live in it, for example, the more your home is likely to appreciate in value and boost your long-term savings. 

But to get the most value from your purchase, it’s worth your time to compare financing options and shop around for the best deal. We also recommend getting a mortgage pre-approval before you start your home search so you know what’s within reach. We can refer you to one of our trusted lending partners for help.

REGRET #2: Rushing Into a Home Purchase

In a competitive housing market, securing a home is often necessary. But don’t let a need for speed tempt you into making an offer before you’ve thought through or fully vetted a new property.   

Rushing into a home purchase isn’t just risky, it’s also one of the most commonly cited sources of homebuyer regret. According to Anytime Estimate, for example, more than 1 in 4 homebuyers felt remorse over how quickly they sped through the home buying process.² 

Getting swept away by your emotions can also lead to buyer’s remorse. If you’ve found a home you love and are competing with other buyers, it can be tempting to overlook key details or bid more than you can afford. That’s one reason it helps to have a skilled professional to calmly guide you through the process and ensure you act with reason, rather than emotion.

Lesson Learned:Buying a home is exciting. But if you don’t keep your emotions in check or act too impulsively, you could make poor choices in the moment that are hard to undo later. 

To avoid making last-minute decisions that could backfire, know what you want, what you need, and what you can afford before you start your home search. We can help you set priorities so you’ll be able to move forward with confidence when the time is right.

REGRET #3: Miscalculating the Costs of Homeownership

Though real estate is a great long-term investment, it can be pricey in the short term, often surprising homeowners unprepared for it. According to some estimates, annual maintenance could cost as much as 1% or more of your home’s purchase price.5 Some buyers also forget to consider additional ownership expenses, such as property taxes, insurance, and repairs.

Failing to think through the costs of homeownership is one of the most common sources of homebuyer regret. According to Anytime Estimate, nearly half of the homebuyers who regret their purchase said they underestimated how much they would spend to live in it.²

However, some homes cost more to live in and maintain than others. So even if you’re certain that you can afford the average cost of homeownership, that doesn’t necessarily mean that every home in your price range will fit neatly into your budget. For example, very old homes with unique maintenance requirements could be extra pricey to keep up. Similarly, homes with high HOA or condo fees could also affect your monthly budget. 

Lesson Learned:  A home should help you build your wealth, not drain it. So it’s important to factor in all the potential costs of living in a home—not just obvious ones like your mortgage payment and taxes. To ensure you don’t get overextended, add up your estimated maintenance and repair costs, as well as any miscellaneous expenses that are unique to a particular home. 

We can help you with these estimates—and, if needed, present you with some less-costly alternatives.

REGRET #4: Underestimating the Time Required To Maintain or Renovate a Home

One of the most joyful aspects of homeownership is relaxing in a home that’s all your own. But if a home is too high maintenance, then you may not have time to savor it. 

Many homeowners love to spend their weekends puttering in their gardens or undertaking home improvement projects. But if that’s not you, then you may not like living in a home with a big yard or with high-maintenance features, like a pool.

According to a survey by Hippo, for example, 47% of homeowners who regret their home purchase complain that too much maintenance and upkeep is required.⁶ 

Similarly, buyers who purchase fixer-uppers are often surprised by how long rehabbing their new homes takes. Although buying a fixer-upper is a great way to save on the purchase price, you could resent it if it consumes your free time.

Lesson Learned:  Renovation and maintenance projects are often time-consuming and stressful. So beware of committing to a property that requires too much of your attention if you don’t have the time or patience for it. With that said, home improvement projects can also bring a lot of joy and satisfaction to owners who like rolling up their sleeves.

We can talk through the realities of homeownership with you and help you choose a property that will fit your personality and schedule.

REGRET #5: Ignoring or Skipping a Home Inspection

Getting swept up in the excitement of buying a home is easy. Sometimes, buyers will agree to skip a home inspection to sweeten their offer in a competitive market. They may also be tempted to pinch pennies since they already face a large outlay. However, if you skip out on a home inspection, you could regret it.

When you hire a home inspector, you get a professional, in-depth examination of the property’s structures and systems before you buy it. It’s a worthwhile investment that can save you money in the long run, either by warning you away from a bad purchase or by providing a list of deficiencies you can use to negotiate with the sellers. 

But even the most thorough home inspection isn’t worth much if you don’t take the time to consider it carefully. If possible, ensure you’re on-site during the inspection so you can observe and ask questions. And don’t forget to re-evaluate any repairs the seller agrees to make to ensure they’ve been properly completed before closing.

Lesson Learned:  A home inspection can reduce your risk and save you money in the long run. But to maximize its effectiveness, you will need to be an active participant in the process.

We’d be happy to share a list of experienced and trustworthy home inspectors in our area. And when the inspection report is complete, we can help you decide if the purchase is worthwhile and negotiate any relevant seller concessions and repairs.

REGRET #6: Choosing a Home That Doesn’t Fit 

Homeownership is often a better investment if you’re willing to stay put for at least five years.⁷ But if your newly purchased home isn’t a good fit, you may not want to stay that long. 

Many homeowner complaints come down to simple lifestyle issues: Although a mismatch may seem small at first, the problems can magnify if you make so many compromises that they interfere with your quality of life.

Or, sometimes, homebuyers can fall in love with a beautiful home and forget about practicalities. For example, a stunning kitchen can’t replace a needed bedroom or bathroom. And a sparkling pool may sit empty if the home requires a lengthy commute to your office.

Ensure you set some guardrails during your home purchase so you don’t over-compromise or accidentally prioritize your wants over your needs.

Lesson Learned:  When you’re dealing with limited inventory or a fixed budget, it may be necessary to sacrifice some items on your home wish list. But if you fail to secure your must-haves, you could come to regret your home choice.

We can help you avoid an ill-fitting home purchase by working with you to set (and stick to) priorities and parameters before you begin your search. 

REGRET #7: Purchasing Without Professional Help

Another path to homebuyer regret? Foregoing the expert guidance and market insight that you can only get from a licensed real estate agent – me.

Buying a home without professional representation can be extremely risky. Therefore, it’s no surprise that 86% of buyers enlist the help of an agent when purchasing a home. And the vast majority find their assistance invaluable: 89% say they would use their agent again or recommend them to others.⁸

Real estate is hyperlocal and extremely fluid—especially when the market constantly changes. So it pays to have an expert who can guide you through an often-complicated process. 

I can help you avoid expensive mistakes that could lead to buyer’s remorse, all while making your home purchase as seamless and stress-free as possible. And since the home seller typically pays my commission, you have no added expense!

Lesson Learned:  When you work with a real estate agent, you benefit from a wealth of expertise and on-the-ground insight that you can’t get anywhere else. We’ll help you steer clear of the missteps that so many homebuyers make, so you can focus on enjoying your new home instead of questioning your choices down the road.

The best part? Since the majority of home sellers pay us a commission at closing, in most cases, we offer our invaluable guidance and assistance at no additional cost to you!

BOTTOMLINE

No one wants to look back on their home purchase and realize they made a big mistake. We can help you avoid the pitfalls so you can buy with confidence. To learn more about how we work to ensure our clients’ satisfaction, reach out today to schedule a free consultation.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources:

1. LendingTree –
   https://www.lendingtree.com/home/mortgage/homebuying-process-survey/
2. Anytime Estimate –
   https://anytimeestimate.com/research/american-home-buyers-2022/ 
3. Zillow Home Loans –
   https://zillow.mediaroom.com/2022-11-18-Prospective-home-buyers-spend-about-as-much-time-researching-new-TVs-as-they-do-mortgage-lenders 
4. LendingTree –
   https://www.lendingtree.com/home/mortgage/mortgage-shopping-study/
5. CNBC –
   https://www.cnbc.com/2022/05/01/survey-majority-of-homeowners-have-regrets.html
6. Hippo –
   https://www.hippo.com/blog/2022-hippo-housepower-report-how-homeowners-are-responding-essential-maintenance-during
7. Realtor.com –
   https://www.realtor.com/advice/sell/how-soon-can-you-sell-a-house-after-buying/ 
8. National Association of Realtors –
   https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers#homebuyers

Numerous home sellers aim for a swift sale, but achieving this often requires preliminary efforts to present their property in its best light. However, enhancing a property’s appeal should be carefully planned to yield optimal outcomes. This is where the expertise of real estate professionals and home stagers becomes valuable.

According to Fixr.com, a home improvement resource, a compilation of frequently recommended home staging projects by real estate professionals has been recently published. The associated costs for each project are also outlined. This data was gathered from the National Association of REALTORS®’ 2023 Profile of Home Staging. Below, you’ll find a breakdown of the top-recommended projects.

Some Highlights

• If you’re considering buying or selling a home, you’ll want to know what’s happening in the housing market.
• Housing inventory is still very low, prices are climbing back up, and homes are selling fast when priced right.
• If you want more information about our local area and what the trends mean for your plans to buy or sell, let’s connect.

If you want to sell your house, consider doing it this summer.

Even though the housing market is no longer experiencing the frenzy that was so characteristic of the last couple of years, it doesn’t mean today’s market is at a standstill. In actuality, buyer traffic is still strong today.

The ShowingTime Showing Index is a measure of how much buyers are touring homes. The graph below uses that index to illustrate buyer activity trends over time to help put today into the proper perspective.

It shows there’s seasonality in real estate. If you look at the last normal years in the market (shown in gray), there was a consistent pattern as buyer activity peaked in the first half of each year (during the peak homebuying season in the spring) and slowed as each year came to a close.

When the pandemic hit in March of 2020, that trend was disrupted as the market responded to the resulting uncertainty (shown in blue in the middle). From there, we entered the ‘unicorn’ years of housing (shown in pink). This is when mortgage rates were record-low and buyer demand was sky high. Similar seasonal trends still existed even during that time, just at much higher levels.

Now, let’s look at 2023. Traffic is down from the previous month and it’s also lower than the peaks we saw in the ‘unicorn’ years. But what’s happening isn’t a steep drop off in demand – it’s a slow return toward more normal seasonality. As the ShowingTime report explains:

“Showing traffic declined about 10% in May . . . This follows a typical seasonal pattern – disrupted by the pandemic but now beginning to return . . .”

And, to highlight this isn’t a drastic decline, let’s zoom in. Here’s a graph using just the May data for the last five years. It shows just how strong buyer demand still is.

What Does That Mean for You?

Buyers are still out there touring homes. They’re more active than they were in May 2022 (when sticker shock over higher mortgage rates started to set in) and certainly more than they were in the last normal years. So, remember, buyer activity is still strong. And it could actually be even stronger if it wasn’t constrained by the limited supply of homes for sale. According to U.S. News:

“Housing markets have cooled slightly, but demand hasn’t disappeared, and in many places remains strong largely due to the shortage of homes on the market.”

Bottom Line

Don’t lose sight of just how active the market still is today. If your house isn’t on the market, it’s not getting in front of all those buyers who are looking to make a purchase right now. Let’s connect to start the process.

While the wild ride that was the ‘unicorn’ years of housing is behind us, today’s market is still competitive in many areas because the supply of homes for sale is still low. If you’re looking to buy a home this season, know that the peak frenzy of bidding wars is in the rearview mirror, but you may still come up against some multiple-offer scenarios.

Here are a few things to consider to help you put your best foot forward when making an offer on a home.

1. Lean on a Real Estate Professional

Rely on an agent who can support your goals and help you understand what’s happening in today’s housing market. Agents are experts in the local market and on the national trends too. They’ll use both of those areas of expertise to make sure you have all the information you need to move with confidence.

Plus, they know what’s worked for other buyers in your area and what sellers may be looking for in an offer. It may seem simple, but catering to what a seller needs can help your offer stand out. As an article from Forbes says:

“Getting to know a local realtor where you’re hoping to buy can also potentially give you a crucial edge in a tight housing market.”

2. Get Pre-Approved for a Home Loan

Having a clear budget in mind is especially important right now given the current affordability challenges. The best way to get a clear picture of what you can borrow is to work with a lender so you can get pre-approved for a home loan.

That’ll help you be more financially confident because you’ll have a better understanding of your numbers. It shows sellers you’re serious, too. And that can give you a competitive edge if you do get into a multiple-offer scenario.

3. Make a Fair Offer

It’s only natural to want the best deal you can get on a home. However, submitting an offer that’s too low does have some risks. You don’t want to make an offer that will be tossed out as soon as it’s received just to see if it sticks. As Realtor.com explains:

“. . . an offer price that’s significantly lower than the listing price, is often rejected by sellers who feel insulted . . . Most listing agents try to get their sellers to at least enter negotiations with buyers, to counteroffer with a number a little closer to the list price. However, if a seller is offended by a buyer or isn’t taking the buyer seriously, there’s not much you, or the real estate agent, can do.”

The expertise your agent brings to this part of the process will help you stay competitive and find a price that’s fair to you and the seller.

4. Trust Your Agent’s Expertise Throughout Negotiations

During the ‘unicorn’ years of housing, some buyers skipped home inspections or didn’t ask for concessions from the seller in order to submit the winning bid on a home. An article from Bankrate explains this isn’t happening as often today, and that’s good news:

“While the market has largely calmed down since then, sellers are still very much in the driver’s seat in this era of scarce housing inventory. It’s not as common for buyers to waive inspections anymore, but it does still happen. . . . It’s in the buyer’s best interest to have a home inspected . . . Inspections alert you to existing or potential problems with the home, giving you not just an early heads up but also a useful negotiating tactic.”

Fortunately, today’s market is different, and you may have more negotiating power than before. When putting together an offer, your trusted real estate advisor will help you think through what levers to pull and which ones you may not want to compromise on.

Bottom Line

When you buy a home this summer, let’s connect so you have an expert on your side who can help you make your best offer.

If you’re thinking of buying or selling a home, one of the biggest questions you have right now is probably: what’s happening with home prices? And it’s no surprise you don’t have the clarity you need on that topic. Part of the issue is how headlines are talking about prices.

They’re basing their negative news by comparing current stats to the last few years. But you can’t compare this year to the ‘unicorn’ years (when home prices reached record highs that were unsustainable). And as prices begin to normalize now, they’re talking about it like it’s a bad thing and making people fear what’s next. But the worst home price declines are already behind us. What we’re starting to see now is the return to more normal home price appreciation.

To help make home price trends easier to understand, let’s focus on what’s typical for the market and omit the last few years since they were anomalies. 

Let’s start by talking about seasonality in real estate. In the housing market, there are predictable ebbs and flows that happen each year. Spring is the peak homebuying season when the market is most active. That activity is typically still strong in the summer but begins to wane as the cooler months approach. Home prices follow along with seasonality because prices appreciate most when something is in high demand.

That’s why, before the abnormal years we just experienced, there was a reliable long-term home price trend. The graph below uses data from Case-Shiller to show typical monthly home price movement from 1973 through 2021 (not adjusted, so you can see the seasonality):

As the data from the last 48 years shows, at the beginning of the year, home prices grow, but not as much as they do entering the spring and summer markets. That’s because the market is less active in January and February since fewer people move in the cooler months. As the market transitions into the peak homebuying season in the spring, activity ramps up, and home prices go up a lot more in response. Then, as fall and winter approach, activity eases again. Price growth slows, but still typically appreciates.

Why This Is So Important to Understand

In the coming months, as the housing market moves further into a more predictable seasonal rhythm, you’re going to see even more headlines that either get what’s happening with home prices wrong or, at the very least, are misleading. Those headlines might use a number of price terms, like:

• Appreciation: when prices increase.
• Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
• Depreciation: when prices decrease.

They’re going to mistake the slowing home price growth (deceleration of appreciation) that’s typical of market seasonality in the fall and winter and think prices are falling (depreciation). Don’t let those headlines confuse you or spark fear. Instead, remember it’s normal to see a deceleration of appreciation, slowing home price growth, as the months go by.

Bottom Line

If you have questions about what’s happening with home prices in our local area, let’s connect.

If you’ve been keeping up with the news lately, you’ve probably come across headlines talking about the increase in foreclosures in today’s housing market. This may have left you with some uncertainty, especially if you’re considering buying a home. It’s important to understand the context of these reports to know the truth about what’s happening today.

According to a recent report from ATTOM, a property data provider, foreclosure filings are up 2% compared to the previous quarter and 8% since one year ago. While media headlines are drawing attention to this increase, reporting on just the number could actually generate worry for fear that prices could crash. The reality is, while increasing, the data shows a foreclosure crisis is not where the market is headed.

Let’s look at the latest information with context so we can see how this compares to previous years.

It Isn’t the Dramatic Increase Headlines Would Have You Believe

In recent years, the number of foreclosures has been down to record lows. That’s because, in 2020 and 2021, the forbearance program and other relief options for homeowners helped millions of homeowners stay in their homes, allowing them to get back on their feet during a very challenging period. And with home values rising at the same time, many homeowners who may have found themselves facing foreclosure under other circumstances were able to leverage their equity and sell their houses rather than face foreclosure. Moving forward, equity will continue to be a factor that can help keep people from going into foreclosure.

As the government’s moratorium came to an end, there was an expected rise in foreclosures. But just because foreclosures are up doesn’t mean the housing market is in trouble. As Clare Trapasso, Executive News Editor at Realtor.com, says:

“Many of these foreclosures would have occurred during the pandemic, but were put off due to federal, state, and local foreclosure moratoriums designed to keep people in their homes . . . Real estate experts have stressed that this isn’t a repeat of the Great Recession. It’s not that scores of homeowners suddenly can’t afford their mortgage payments. Rather, many lenders are now catching up. The foreclosures would have happened during the pandemic if moratoriums hadn’t halted the proceedings.”

In a recent article, Bankrate also explains:

“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes. Lenders weren’t filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020. And while there has been a slight uptick in foreclosures since then, it’s nothing like it was.”

Basically, there’s not a sudden flood of foreclosures coming. Instead, some of the increase is due to the delayed activity explained above while more is from economic conditions.

To further paint the picture of just how different the situation is now compared to the housing crash, take a look at the graph below. It uses data on foreclosure filings for the first half of each year since 2008 to show foreclosure activity has been consistently lower since the crash.

While foreclosures are climbing, it’s clear foreclosure activity now is nothing like it was back then. Today, foreclosures are far below the record-high number that was reported when the housing market crashed.

In addition to all the factors mentioned above, that’s also largely because buyers today are more qualified and less likely to default on their loans.

Bottom Line

Right now, putting the data into context is more important than ever. While the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst, and that won’t lead to a crash in home prices.

Some Highlights

• According to a recent Gallup poll, real estate has been voted the best long-term investment for 11 years in a row, beating gold, stocks, bonds, and more.
• Owning real estate means more than just having a home—it’s an investment in your future. That’s because it’s typically a stable and secure asset that tends to increase in value as time goes on.
• Let’s connect if you’re ready to buy a home and invest in your future.