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There’s no doubt today’s housing market is very different than the frenzied one from the past couple of years. In the second half of 2022, there was a dramatic shift in real estate, and it caused many people to make comparisons to the 2008 housing crisis. While there may be a few similarities, when looking at key variables now compared to the last housing cycle, there are significant differences.
In the latest Real Estate Forecast Summit, Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), drew the comparisons below between today’s housing market and the previous cycle:
Looking at the facts, it’s clear: today is very different than the housing market of 15 years ago.
And in today’s market, with inventory rising and less competition from other buyers, there’s opportunity right now. According to David Stevens, former Assistant Secretary of Housing:
“So be advised…this may be the one and only window for the next few years to get into a buyer’s market. And remember…as the Federal Reserve data shows…home prices only go up and always recover from recessions no matter how mild or severe. Long term homeowners should view this market…right now…as a unique buying opportunity.”
Today’s housing market is nothing like the real estate market 15 years ago. If you’re a buyer right now, this may be the chance you’ve been waiting for.
Home equity has been a hot topic in real estate news lately. And if you’ve been following along, you may have heard there’s a growing number of homeowners with negative equity. But don’t let those headlines scare you.
In truth, the headlines don’t give you all the information you really need to understand what’s happening and at what scale. Let’s break down one of the big equity stories you may be seeing in the news, and what’s actually taking place. That way, you’ll have the context you need to understand the big picture.
One piece of news circulating focuses on the percentage of homes purchased in 2022 that are currently underwater. The term underwater refers to a scenario where the homeowner owes more on the loan than the house is worth. This was a huge issue when the housing market crashed in 2008, but it’s much less significant today.
Media coverage right now is based loosely on a report from Black Knight, Inc. The actual report from that source says this:
“Of all homes purchased with a mortgage in 2022, 8% are now at least marginally underwater and nearly 40% have less than 10% equity stakes in their home, . . .”
Let’s unpack that for a moment and provide the bigger picture. The data-bound report from Black Knight is talking specifically about homes purchased in 2022, but media headlines don’t always mention that timeframe or provide the surrounding context about how unusual of a year 2022 was for the housing market. In 2022, home price appreciation soared, and it reached its max around March-April. Since then, the rate of appreciation has been slowing down.
Homeowners who bought their house last year right at the peak or those who paid more than market value in the months that followed are more likely to fall into the category of being marginally underwater. The qualifier marginally is another key piece of the puzzle the media isn’t necessarily including in their coverage.
So, what does that mean for those who purchased a home in 2022? It’s important to remember, owning a home is a long-term investment, not a short-term play. When headlines focus on the short-term view, they’re not necessarily providing the full context.
Typically speaking, the longer you stay in your home, the more equity you gain as you pay down your loan and as home prices appreciate. With recent market conditions, you may not have gained significant equity right away if you owned the home for just a few months. But it’s also true that many homeowners who recently bought their house are unlikely to be looking to sell quite yet.
As with everything, knowing the context is important. If you have questions about real estate headlines or about how much equity you have in your home, let’s connect.
If you’re thinking about buying or selling a home soon, you probably want to know what you can expect from the housing market this year. In 2022, the market underwent a major shift as economic uncertainty and higher mortgage rates reduced buyer demand, slowed the pace of home sales, and moderated home prices. But what about 2023?
An article from HousingWire offers this perspective:
“The red-hot housing market of the past 2 ½ years was characterized by sub-three percent mortgage rates, fast-paced bidding wars and record-low inventory. But more recently, market conditions have done an about-face. . . . now is the opportunity for everyone to become re-educated about what a ‘typical’ housing market looks like.”
This year, experts agree we may see the return of greater stability and predictability in the housing market if inflation continues to ease and mortgage rates stabilize. Here’s what they have to say.
The 2023 forecast from the National Association of Realtors (NAR) says:
“While 2022 may be remembered as a year of housing volatility, 2023 likely will become a year of long-lost normalcy returning to the market, . . . mortgage rates are expected to stabilize while home sales and prices moderate after recent highs, . . .”
Danielle Hale, Chief Economist at realtor.com, adds:
“. . . buyers will not face the extreme competition that was commonplace over the past few years.”
Lawrence Yun, Chief Economist at NAR, explains home prices will vary by local area, but will net neutral nationwide as the market continues to adjust:
“After a big boom over the past two years, there will essentially be no change nationally . . . Half of the country may experience small price gains, while the other half may see slight price declines.”
Mark Fleming, Chief Economist at First American, says:
“The housing market, once adjusted to the new normal of higher mortgage rates, will benefit from continued strong demographic-driven demand relative to an overall, long-run shortage of supply.”
If you’re looking to buy or sell a home this year, the best way to ensure you’re up to date on the latest market insights is to partner with a trusted real estate advisor. Let’s connect.
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Homebuyers are flooding the housing market right now to take advantage of record-low mortgage rates. Many have a sense of urgency to find a home soon since experts forecast a steady rise in both rates and home prices this year and next. As a result, buyer demand greatly outweighs the current housing supply. Here’s how the shortage of houses for sale sets yours up to be the oasis in an inventory desert.
According to the National Association of Realtors (NAR), today’s housing inventory sits at an incredibly low 2.1-month supply, far below the 6-month mark for a neutral market. Inventory of single-family homes a year ago was already very low, and as you can see in the graph below, this year’s levels are even lower:Due to these market conditions, today’s buyers frequently enter fierce bidding wars while trying to purchase a home. This in turn drives up home prices and gives sellers incredible leverage in the negotiation process, two big wins if you’re going to sell your house this year.
In such a hot market, it can feel as though the supply of homes has virtually dried up, leaving buyers to wander in an inventory desert. That’s why there’s never been a better time to sell. To a parched buyer needing to secure a home as soon as possible, your house could be a true oasis.
by The CE Shop Team
How Biden’s Jobs & Infrastructure Plan Would Affect Housing | The CE Shop
President Biden Commits to Addressing Affordable Housing Crisis
President Joe Biden’s $2.3 trillion jobs and infrastructure proposal includes a $213 billion investment in affordable housing, pledging to “build, preserve, and retrofit more than two million homes and commercial buildings to address the affordable housing crisis.”
The proposal, called the American Jobs Plan, has faced significant Republican opposition since it was released in March. It’s one of two sweeping economic initiatives that Biden has introduced in his first few months as president. The second, the $1.8 trillion American Families Plan, focuses on children, families, and education.
“There is a severe shortage of affordable housing options in America,” the American Jobs Plan says. “Millions of families pay more than half their income on rent, and home energy costs are a significant concern for American renters as well. And, across the country, people are struggling to purchase their first home.”
Soon after the proposal was unveiled, National Association of Realtors® President Charlie Oppler released a statement of support, praising the Biden administration for recognizing the importance of affordable housing.
“NAR thanks President Biden and his administration for recognizing that housing represents a critical piece of our nation’s overall infrastructure,” Oppler said. “While a lack of inventory and rising prices continue to limit opportunities for homeownership — especially for younger Americans and minority populations — policies that support nationwide housing affordability are now more important than ever.”
Oppler also emphasized the importance of the plan’s investment in broadband internet access. The American Jobs Plan promises to “bring affordable, reliable, high-speed broadband to every American, including the more than 35% of rural Americans who lack access to broadband at minimally acceptable speeds.”
The statement says that the National Association of Realtors® supports the creation of a comprehensive national policy to stimulate the deployment of broadband in underserved areas, increase data speeds, and lower broadband prices.
“Broadband access is no longer a luxury, it is a critical utility,” Oppler said. “That was true before the pandemic, and even more so now.”
The proposal identifies five ways that the $213 billion would be used to address the affordable housing crisis.
In addition to creating more affordable housing, Biden takes aim at “exclusionary zoning laws and harmful land-use policies” such as minimum lot sizes, mandatory parking requirements, and prohibitions on multi-family housing, arguing that they “have inflated housing and construction costs and locked families out of areas with more opportunities.”
Also, because “years of disinvestment have left our public housing in disrepair,” Biden is calling on Congress to allocate $40 billion to improve the infrastructure of the public housing system in the United States.
“The President’s plan will help address the growing cost of rent and create jobs that pay prevailing wages, including through project labor agreements with a free and fair choice to join a union and bargain collectively,” the plan says.
The American Jobs Plan would:
For more information on the proposal, you can read it in full on the White House website.
Although the American Jobs Plan addresses many of the difficulties that low-income homebuyers and renters face in the housing market today, some experts caution that it doesn’t do enough to solve the crisis.
“It’s a historic amount of money, but we have a historic-size problem, and even this amount of money is not going to solve the problem,” David Dworkin, president of the National Housing Conference, told HousingWire.
Some say that even if the plan is passed, it might not be enacted quickly enough to meet the urgent need.
“Anything that can help increase the number of housing units is a good thing. And the consideration of enhancing the affordable choices is vital,” said Tim Sullivan, senior managing principal at Zonda, a housing market research firm, in an interview with Forbes. “Is this sufficient? Probably not since we need the additional housing now, and given the speed at which the government moves, I think there will be a lag in bringing this product to market.”
