Three Reasons Why This is Not a Housing Crisis

In times of uncertainty, one of the best things we can do to ease our fears is to educate ourselves with research, facts, and data. Digging into past experiences by reviewing historical trends and understanding the peaks and valleys of what’s come before us is one of the many ways we can confidently evaluate any situation. With concerns of a global recession on everyone’s minds today, it’s important to take an objective look at what has transpired over the years and how the housing market has successfully weathered these storms.

1. The Market Today Is Vastly Different from 2008

We all remember 2008. This is not 2008. Today’s market conditions are far from the time when housing was a key factor that triggered a recession. From easy-to-access mortgages to skyrocketing home price appreciation, a surplus of inventory, excessive equity-tapping, and more – we’re not where we were 12 years ago. None of those factors are in play today. Rest assured, housing is not a catalyst that could spiral us back to that time or place.

According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:

“It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have many households who are overleveraged with their mortgage payments and are potentially in trouble.”

In addition, the Goldman Sachs GDP Forecast released this week indicates that although there is no growth anticipated immediately, gains are forecasted heading into the second half of this year and getting even stronger in early 2021.

Both of these expert sources indicate this is a momentary event in time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 2008 that failed to get back to a sense of normal for almost four years. Although it poses plenty of near-term financial challenges, a potential recession this year is not a repeat of the long-term housing market crash we remember all too well.

2. A Recession Does Not Equal a Housing Crisis

Next, take a look at the past five recessions in U.S. history. Home values actually appreciated in three of them. It is true that they sank by almost 20% during the last recession, but as we’ve identified above, 2008 presented different circumstances. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6% (see below):

3. We Can Be Confident About What We Know

Concerns about the global impact COVID-19 will have on the economy are real. And they’re scary, as the health and wellness of our friends, families, and loved ones are high on everyone’s emotional radar.

According to Bloomberg,

“Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up.”

That said, we can be confident that, while we don’t know the exact impact the virus will have on the housing market, we do know that housing isn’t the driver.

The reasons we move – marriage, children, job changes, retirement, etc. – are steadfast parts of life. As noted in a recent piece in the New York Times, “Everyone needs someplace to live.” That won’t change.

Bottom Line

Concerns about a recession are real, but housing isn’t the driver. If you have questions about what it means for your family’s homebuying or selling plans, reach out to a local real estate professional to discuss your needs.

Source

March 2020 Real Estate News Updates

U.S. Postpones April 15 Tax Payments for 90 Days for Most Americans

By Richard Rubin, Laura Saunders and Andrew Restuccia

Updated March 17, 2020 12:59 pm ET

WASHINGTON—The U.S. government will postpone the April 15 tax-payment deadline for millions of individuals, giving Americans another 90 days to pay their 2019 income-tax bills in an unprecedented move.

The IRS, using authority under President Trump’s national-emergency declaration, will waive interest and penalties as well, Treasury Secretary Steven Mnuchin said at the White House Tuesday. The delay is available to people who owe $1 million or less and corporations that owe $10 million or less, Mr. Mnuchin said.

The government granted the extension to give taxpayers a financial cushion as households and businesses cope with the sudden slowdown in economic activity caused by the coronavirus outbreak. The move could provide households with hundreds of billions of dollars in temporary liquidity, Mr. Mnuchin said last week in previewing the government’s actions.

“We are going to use all the tools we have,” Mr. Mnuchin said on Tuesday. “And what tools we don’t have, we’re going to go to Congress.”

The IRS will continue to process tax refunds, and Mr. Mnuchin urged people who can file their tax returns to do so. Mr. Mnuchin said last week that the tax deadline would be delayed for all but the superrich, but his Tuesday announcement was the first explanation of the length of the delay and how it might work. The tax agency hasn’t yet released full details about how the delay will work.

As of March 6, the IRS had received 68 million individual income-tax returns. That was less than half of the returns that the IRS normally expects to get, meaning that tens of millions of people can benefit from the relaxed deadlines.

Many taxpayers who expect refunds file soon after the IRS opens filing in late January. That is particularly true for low-income households that benefit from the earned-income tax credit, which gives them cash.

About three-quarters of households typically receive refunds, and the IRS will still process returns and send out cash. However, people who file closer to the deadline typically owe money and are waiting to pay. They will benefit the most from Tuesday’s announcement, as will businesses that are worried about their cash flow.

Normally, taxpayers must pay what they owe by the mid-April deadline, and they can seek six-month extensions to file their full returns.

The IRS has adjusted its own operations during the outbreak, shifting many employees to remote work, according to a message that Commissioner Charles Rettig sent to workers late Friday. In addition, Mr. Rettig limited travel, gave employees the option of avoiding face-to-face contacts with taxpayers and stopped those in-person contacts in heavily affected areas such as New York and Seattle.

“We continue to look at what sort of flexibilities and additional options can be available to expand telework flexibility given possible resource limitations,” he wrote.

Source: https://www.wsj.com/articles/u-s-postpones-april-15-tax-deadline-for-90-days-for-millions-of-americans-11584463242

5 Simple Graphs Proving This is NOT Like Last Time

With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.

2. Prices are not soaring out of control.

Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.

There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.

4. Houses became too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:

5. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:

During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.

Bottom Line

If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

Buying A Home: Do You Know the Lingo?

Some Highlights:

• Buying a home can be intimidating if you’re not familiar with the terms used throughout the process.

• To point you in the right direction, here’s a list of some of the most common language you’ll hear along the way.

• The best way to ensure your homebuying process is a positive one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher.’

Equity Gain Growing in Nearly Every State

Rising home prices have been in the news a lot lately, and much of the focus is on whether they’re accelerating too quickly and how sustainable the growth in prices really is. One of the often-overlooked benefits of rising prices, however, is the impact they have on a homeowner’s equity position.

Home equity is defined as the difference between a home’s fair market value and the outstanding balance of all liens on the property. While homeowners pay down their mortgages, the amount of equity they have in their homes climbs each time the value increases.

Today, the number of homeowners that currently have significant equity in their homes is growing. According to the Census Bureau, 38% of all homes in the country are mortgage-free.  In a home equity study, ATTOM Data Solutions revealed that of the 54.5 million homes with a mortgage, 26.7% of them have at least 50% equity. That number has been increasing over the last eight years.

CoreLogic also notes:

“…the average homeowner gained approximately $5,300 in equity during the past year.”

The map below shows a breakdown of the increasing equity gain across the country, painting a clear picture that home equity is growing in nearly every state.

Bottom Line

This may be the year to take advantage of your home equity by applying it forward, either as you downsize or as you move up to a new home.

Homeowners' 5 Biggest Remodeling Regrets

Remodeling any aspect of a home can be a big job and a lot can go wrong when owners aren’t adequately prepared. Houzz, a home remodeling website, asked a panel of renovating experts the most common remodeling blunders they see. Here are a few of their responses.

Not budgeting properly.

Underestimating the costs of a project can be a dire mistake that could leave homeowners either with an unfinished property or having to incur a financial loss. Have a detailed budget so you don’t run out of money. Remodeling experts advise always including a 10% to 20% buffer in the budget for any unexpected costs when tackling a remodel.

Assuming DIY will save you money.

Remodeling experts call it the “DIY trap,” and rookie remodelers are especially prone to it. It’s not always cheaper to do a project yourself. It may not look right and could take triple the amount of time to complete than if you would have just hired a pro. “Limit your DIY tasks to things such as painting and simple landscaping jobs, and dedicate your time to project managing the renovation,” experts told Houzz.

Selecting the cheapest contractor.

Another common pitfall is to go with the cheapest quote from a contractor. You don’t want to have to redo poor work. Don’t just focus on the affordability of a contractor’s quote but evaluate fully what it specifies, experts recommend. Gather quotes from at least three contractors and compare them in detail. Also, evaluate the quality of their work through project photos and professional recommendations.

Failing to describe what you want accurately.

Know exactly what you want before you start and use the right words to describe it. Create idea books; search online for ideas online or in magazines; and have a specific list of layouts and finishes you desire. Become familiar with the proper terminology of those looks and finishes so you communicate them correctly to the pros, the experts recommend.

Not researching the material options.

In the same regard, choosing materials often requires some homework. Builders or contractors may fall back on the same materials they always use, but that doesn’t always mean those are right for the project. “Spend time researching the various materials options available—including looks, price, pros and cons, sustainability, durability, and which ones are best suited to your location, and take this information to your builder,” Houzz notes. “Armed with this knowledge, you can decide together the most suitable materials and finishes for your project.”

View more common remodeling mistakes at Houzz.com.

Source: “10 Biggest Remodeling Regrets and How to Avoid Them,” Houzz.com (March 10, 2020)

The Difference an Hour Makes

Some Highlights:

• Don’t forget to set your clocks forward this Sunday, March 8 at 2:00 AM EST in observance of Daylight Saving Time, unless you’re a resident of Arizona or Hawaii!

• Every hour in the United States, 568 homes are sold and median home values rise by $1.92.

• As we “spring forward” this year, be sure to reach out to a local real estate professional to see how you can take advantage of every hour in the housing market.

Impact of the Coronavirus on the U.S. Housing Market

The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.

With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?

The National Association of Realtors (NAR) anticipates:

“At the very least, the coronavirus could cause some people to put home sales on hold.”

While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.

For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.

According to the National Association of Home Builders (NAHB):

“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”

This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.

Bottom Line

The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.

Keeping Current Matters

American Canyon's General Plan Update Will Tackle the Toughest Issues

By: Barry Eberling

American Canyon leaders and citizens are imagining what schools, parks, utilities and traffic-slammed Highway 29 might—and should- look like in 2040.

They are updating the city general plan, a task scheduled to take until summer 2022. The City Council last December approved hiring consultants Mintier Harnish to help at a cost of $1.5 million.

American Canyon is crafting a vision that will affect other parts of Napa County. The south county community of about 21,000 people is a hot spot for housing and industrial growth. The congested, local stretch of Highway 29 is a key route to the Bay Area.

California requires communities to have general plans. One basic idea behind them is, how will the community handle growth?

“It represents your blueprint to the future,” consultant Rick Rust said at a Feb. 18 “State of the City” meeting. “Some people call it the Constitution for the city – where are you going to go and how are you going to get there?”

American Canyon has formed a general plan citizens committee to look at one of the most pressing issues – traffic. At its Jan. 21 meeting, the City Council gave marching orders.

Vice Mayor David Oro said he wants the committee to do more than blame Caltrans for Highway 29 traffic woes. He wants it to look at things that American Canyon can control.

“What if we could be a bike community?” Oro said. “Could we imagine that?”

Some Highway 29 commuters use residential side streets to try to avoid traffic snarls, to the frustration of locals.

“I would like the committee to start exploring ways we can discourage cut-through traffic, recognizing we can’t torpedo the Waze app and things like that,” City Councilmember Mark Joseph said.

City Councilmember Mariam Aboudamous and Joseph talked about possibly having traffic-calming measures on some streets.

“Just standing on Melvin (Road) for five minutes, you’ll see at least 20 cars flying by,” Aboudamous said. “It’s scary. And what’s even worse in those neighborhoods are how terrible the sidewalks are.”

Councilmember Kenneth Leary said if American Canyon is going to provide the housing for people who travel to work Upvalley, then it needs more help on Highway 29 traffic issues.

Leary challenged the notion that “this is just going to be a rural county forever and everything else is going to be thrown down here and we don’t care. There is going to be a reckoning one day and it needs to be planned for and we need to deal with this.”

On Wednesday, 14 members of the general plan circulation committee met in the City Council chamber.

“The whole point of being appointed is to get your opinions and views,” Community Development Director Brent Cooper told them.

Then members broke into groups to look at existing city documents addressing highway congestion, traffic calming, bike routes and walking routes. Their task was to decide if these plans can be improved or need to be thrown out for a fresh start.

Then there’s the major issue of the proposed West Side Connector.

A planned Devlin Road extension will create a western, parallel route to Highway 29 that has its southern terminus in the Green Island industrial area. The question is how to push the route farther south to link with residential neighborhoods without flooding those neighborhoods with traffic.

American Canyon will take the circulation committee on field trip to look at possible West Side Connector routes.

Another general plan committee is looking at education and lifelong learning. The City Council on Jan. 21 had some comments for this committee, too.

Joseph said that if American Canyon is going to have only one middle school, perhaps it should be located on a larger parcel on the east side of town. Perhaps the committee should explore whether it’s feasible for American Canyon to have its own school district.

General plan updates sometimes result in cities deciding to expand their growth boundaries. Whether the issue will come up during the American Canyon update remains to be seen.

Napa County and American Canyon agreed in 2008 to a maximum size for city boundaries through 2030. But the general plan update looks ahead to 2040, beyond the agreement.

Cooper said the general plan update has only just begun. It’s too early to tell if the growth boundary will need to be changed. However, any proposed change may require an amended agreement with the county.

Nor has the city of about 21,000 people yet set a population target for 2040. However, Cooper said, the recently approved Watson Ranch and Broadway plans will constitute the bulk of new housing over 20 years and combined could add 8,500 residents.

At the Feb. 18 State of the City meeting, the audience of more than 100 people had the chance to participate in a general plan survey.

They named the biggest challenge facing American Canyon. Forty-nine percent said Highway 29 traffic, 21 percent said lack of affordable housing, 17 percent said lack of good-paying jobs, 6 percent said overcrowded schools, 4 percent said climate change effects and the remainder chose something else.

But apparently the specter of rising sea levels and temperatures is a major concern in this city bordering wetland and water. When asked the biggest challenge for 2040, 31 percent said climate change effects, with Highway 29 traffic dropping to second at 29 percent.

The American Canyon general plan has sections addressing circulation, recreation, education, housing and other topics. Go to https://bit.ly/2wa2kOQ to find more out more information on the update and how to participate.

A Vision for the Greenest Homes Ever

by Buck Wargo

It’s not new-fangled gadgetry that makes the New American Home, a model reflecting the latest in construction and design standards, so cutting-edge. The 6,428-square-foot, five-bedroom property, which was unveiled at January’s International Builders’ Show in Las Vegas, doesn’t spare technology—check out the “transitional” outdoor entertainment space with a custom fireplace and “vanishing edge” pool. But it’s the multitude of ways the home slashes energy costs that’s most noteworthy.

Located in Henderson, Nev., overlooking the Las Vegas skyline, the home was constructed using the industry’s most advanced building products and techniques to optimize energy efficiency, according to the National Association of Home Builders. The property is expected to achieve LEED Emerald-level status—the National Green Building Standard’s highest efficiency rating.

The home features spray-foam insulation, high-quality solar panels, automated LED lighting and green appliances, and the most energy-efficient doors and windows, according to Drew Smith, a Florida energy and green building consultant who worked on the project. While the average new home has a HERS rating of 100, the New American Home scored –16. “That’s tied for the lowest for a New American Home,” Smith says. “Solar made a difference. Without it, [the home’s HERS rating] was 49. And for a house that large, that’s the lowest HERS index we have ever seen. The calculated energy savings is about $4,000 a year because of the solar and total design of the home.”

The building standards of the project reflect how home builders across the country are prioritizing high-performance construction practices, NAHB officials say. A new study from the association shows that 91% of builders are incorporating energy-efficient practices—including tight building envelopes and high-performance ventilation systems—and 69% do so on a majority of their projects. “These findings complement the results of a recent study where home buyers ranked high-performance products and practices among the top features they want in a home,” says John Barrows, chair of the NAHB’s Sustainability and Green Building Subcommittee. “This shows us that the value of home performance is increasing among builders and consumers.”

Click Here for the Link to the Slideshow

But while builders credit consumer demand for prompting increased eco-friendly construction, they say even higher demand is necessary to influence more meaningful growth in the green-home market. Only a third of builders—still an impressive number—identify as green, according to Donna Laquidara-Carr, industry insights research director at Dodge Data & Analytics, which conducted the NAHB study.

A majority of builders and remodelers say their customers perceive green homes to be more expensive than traditional homes, Laquidara-Carr says. Still, about 70% of single-family home builders believe their customers will pay more for a green home, she adds.

Other Emerging Building Trends

The NAHB released a separate study naming the home trends, buyer preferences, and must-have features for 2020, including energy efficiency. Efficient lighting, programmable thermostats, and Energy Star–rated appliances are the green features most likely to be included in new homes this year, according to Rose Quint, the NAHB’s assistant vice president of survey research.

Additionally, the study shows that the average home size continues to decrease after peaking at 2,689 square feet in 2015. It has fallen four years in a row to its current 2,520 square feet and is at its smallest since 2011. The majority of both first-time and repeat buyers say they would rather have a smaller home with high-quality amenities than a bigger home with fewer features, Quint says. The percentage of homes incorporating four or more bedrooms, three-plus bathrooms, and garages for three or more cars has also dropped to levels not seen since 2012, she adds. “This points to an industry trying to meet the demands of the entry-level home buyer. Builders are struggling to meet these demands because of factors such as restrictive zoning regulations and lot prices, with the price of a new lot in 2019 averaging $57,000.”

The NAHB also highlighted home design trends coming in the future, including:

• Colorful kitchens incorporating aqua, dark woods, and new, colored textures.

• Crisp colors paired with warm woods.

• Expansive, large-format windows.

• High-quality signature front entries and improved streetscapes.

• Nontraditional storage solutions. Instead of cabinetry, designers are opting for shelving, both as a storage solution and a design element.

• Seamless indoor and outdoor connections.

• Increased use of mixed metals, materials, and textures, including wallpaper, to add depth to designs.

• Wood detailing to create texture.

Prefab Technology Evolves

Japan’s largest home builder, Sekisui House, and its American subsidiary, Woodside Homes, used the backdrop of January’s Consumer Electronics Show in Las Vegas to unveil its prefabricated homebuilding technology, which can speed up construction, address a shortage of skilled labor, and build homes more resilient to natural disasters.

The companies provided tours of a multimillion-dollar concept home in a luxury Vegas enclave as part of the unveiling. The companies’ leaders say the two-story, 7,200-square-foot home, with four bedrooms and five-and-a-half baths, showcases design and construction systems and techniques that are unlike any the U.S. homebuilding industry has ever used.

The model home was built using a technique called Shawood, in which lumber, with the aid of computers and automation, is precision-engineered, cut, and drilled in a factory near Tokyo and shipped to the U.S. The pieces were put together in the field using number sequences on a blueprint as a guide. It’s a holistic system that has been used in Japan for more than two decades, covering the home’s framing, foundation, and flooring, the companies’ officials say. That enables a simpler, faster, and more precise building process, including fire-resistant porcelain siding that also helps protects the home from earthquakes, hurricanes, and other natural disasters, says Joel Abney, vice president of operations at Woodside Homes.

“The goal is to showcase how the trends are changing in housing and what the future can look like,” Abney says. “There hasn’t been much technological advancement overall in single-family home construction because we’re building the same way in the U.S. as we were 20, 50, and 100 years ago. This is looking at advancing it to that next level. The home provides U.S. companies with a template for how to build houses that are significantly more resistant to Mother Nature’s forces than the traditional American stick-frame structure.”

How Much "Housing Wealth" Can You Build in a Decade?

Earlier this month, the National Association of Realtors (NAR) released a special study titled Single-Family Home Price Gains by Years of Tenure. The study estimates median home price appreciation over the last 30 years based on the length of homeownership.

Below are three graphs depicting the most important data revealed in the study.

How much have home prices increased?

One of the first measures of the financial benefits of homeownership is the net worth (in the form of equity) an owner can build over time. The study showed the average increase in home values based on how long homeowners stayed in a home.

What was the percentage of appreciation?

Another way to look at this is by the percentage increase in value over time, called appreciation:

Was this appreciation consistent throughout the country?

Today, when we think of markets that have done well over the last decade, we have a tendency to think about San Francisco, San Diego, Seattle, and other West Coast cities. Though it is true the West Region showed the highest price growth over the last three decades, we can see how every region of the country did quite well in ten-year increments:

This data validates the claim that homeownership is great for building wealth. The importance of this information was highlighted in the study’s first sentence:

“Homeownership is an important source of wealth creation, enabling current homeowners and succeeding generations to move up the economic ladder.”

Bottom Line

Homeownership has many financial and non-financial benefits. The accumulation of “housing wealth” through increased equity is a major one. If you’re thinking of buying a home for the first time or moving up to your dream home, the sooner you make the move, the sooner your net worth will begin to grow.

Thinking of Selling? Now May Be the Time.

The housing market has started off much stronger this year than it did last year. Lower mortgage interest rates have been a driving factor in that change. The average 30-year rate in 2019, according to Freddie Mac, was 3.94%. Today that rate is closer to 3.5%.

The Census Bureau also just reported the highest homeownership rate since 2014 for people under 35. This is evidence that owning their own home is becoming more important to Millennials as they reach the age where marriage and children are part of their lives.

According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), buyer demand across the country is strong. That’s not the case, however, with seller demand, which remains weak throughout most of the nation. Here’s a breakdown by state:

Demand for housing is high, but supply is extremely low. NAR also just reported that the actual number of homes currently for sale stands at 1.42 million, which is one of the lowest totals in almost three decades. Additionally, the ratio of homes for sale to the number purchased currently stands at 3.1 months of inventory. In a normal market, that number would be nearly double that at 6.0 months of inventory.

What does this mean for buyers and sellers?

Buyers need to remain patient in the search process. At the same time, buyers must be ready to act immediately once they find the right home.

Sellers may not want to wait until spring to put their houses on the market. With demand so high and supply so low, now is the perfect time to sell your house for the greatest dollar value and the least hassle.

Bottom Line

The real estate market is entering the year like a lion. There’s no indication it will lose that roar, assuming inventory continues to come to market.

Premiere Napa Valley Raises $3.9 Million

“Bids at Premiere Napa Valley this Saturday raised more than $3.9 million, according to a press release from the Napa Valley Vintners (NVV).

The group holds the annual event in support of their work to “promote, protect and enhance the Napa Valley,” according to NVV.

This year’s auction featured 201 lots, bidding on which lasted almost four hours. The night’s highest bid was placed on a five-case (60 bottle) lot of 2018 Cabernet Sauvignon from Rudd Estate, a whopping $2,000 per bottle. The bid, from Swedish buyer Gregor Greber, was said to be a tribute to Leslie Rudd, a storied vintner and entrepreneur for whom Rudd Estate was a central focus of his sprawling portfolio of investments in Napa Valley. Rudd died in the spring of 2018.

A 20-case (240 bottle) lot of red wine from Darioush received the second-highest bid of the night at $115,000. Also notable was a five-case lot of Cabernet Sauvignon from Shafer Vineyards, which, at $85,000, was seen as a tribute to John Shafer, a philanthropist, vintner and a central figure of Napa’s wine industry who died last March at the age of 94.

Premiere Napa Valley in past years has raised as much as $6 million through the course of a single auction, as it did in 2015, when it set its fundraising record. The invitation-only event regularly draws prestigious winemakers, wine critics and wine buyers, some of whom come from overseas to attend.”

Sarah Klearman, Napa Valley Register

“For more information about the release of Premiere Napa Valley 2020 wines and to view and download images visit premierenapavalley.com. Highlights from the week can be found on social media with the hashtag #PNV20.

About the Napa Valley Vintners

The Napa Valley Vintners nonprofit trade association has been cultivating excellence since 1944 by inspiring its 550 members to consistently produce wines of the highest quality, to provide environmental leadership and to care for the extraordinary place they call home. Learn more at napavintners.com”

Contact: Tia Butts, Media Contractor - 707.260.5620, tbutts@napavintners.com

Opportunity in the Luxury Market This Year

Homes priced in the top 25% of a price range for a particular area of the country are considered “premium homes.” At the start of last year, many of the more expensive homes listed for sale hadn’t seen as much interest, since much of the demand for housing over the past few years has come from first-time buyers looking for starter homes. It looks like buyer activity, however, is starting to show a shift in this segment.

According to the January Luxury Report from the Institute for Luxury Home Marketing (ILHM):

“In a snapshot of 2019, despite pessimism at the start of the year, the last quarter showcased a strengthening, with an upswing in the luxury market for sales in both the single family and condo markets.”

Momentum is growing, and those looking to enter the luxury market are poised for success in 2020 as well. With more inventory available at the upper-end, historically low interest rates, and increasing average wages, the stage is set for buyers with an interest in this tier to embrace the perfect move-up opportunity.

The report highlights the increase in buyer activity in this segment, resulting in growing sales toward the end of 2019:

“According to reports from many luxury real estate professionals, the significant increase in number of properties bought at the end of 2019 versus 2018 is reflective of an early 2019 holding pattern.

Many of early 2019’s prospective luxury buyers held off while waiting to see how prices would react to new tax regulations and other policy changes. Buyer confidence returned in late spring and compared to 2018, above average sales were reported in the final quarter of 2019.”

With evidence of strong buyer confidence, this is great news, as more homeowners are building equity and growing their net worth throughout the country:

“Many homeowners are now diversifying their wealth, owning several properties rather than a single mega mansion. In addition, there have been an increase number of home purchases taking place in smaller cities, reflecting the rising number of people relocating from major metropolises. Their property equity wealth or ability to pay high rental costs have afforded them the opportunity to purchase luxury properties in…secondary cities throughout North America.”

With a strong economy and a backdrop set for moving up this year, it’s a great time to explore the luxury market. Keep in mind, luxury can mean different things to different people, too. To one person, luxury is a secluded home with plenty of property and privacy. To another, it is a penthouse at the center of a bustling city. Knowing what characteristics mean luxury to you will help your agent understand what you’re after as you define the scope and location for the home of your dreams.

Bottom Line

If you’re thinking about upgrading your current house to a luxury home, or adding an additional property to your portfolio, reach out to a local real estate professional to determine if you’re ready to make your move.

A Look at Home Sales Across the Country by Region

Existing-home sales have been fluctuating in recent months, but one clear trend is emerging: First-time home buyers are making a move into the housing market as low mortgage rates prove to be an enticing incentive.

Lawrence Yun, chief economist for the National Association of REALTORS®, says he’s encouraged by the upturn in first-time home buyers in NAR’s latest existing-home sales report. First-timers comprised 32% of sales last month, up from 29% a year ago, according to NAR. “It’s good to see first-time buyers slowly stepping into the market,” Yun says. “The rise in the homeownership rate among younger adults under 35 and minority households means an increasing number of Americans can build wealth by owning real estate. Still, in order to further expand opportunities, significantly more inventory and home construction are needed at the affordable price points.”

The national homeownership rate has been rising strongly among people younger than 35, increasing from 35.4% in early 2019 to 37.6% in late 2019, Yun adds. Across age groups, existing-home sales are off to a “strong start” at 5.46 million for 2020, Yun says. “The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales.”

However, overall sales in January dipped month over month due mostly to the Western region of the country. Overall, existing-home sales—which include completed transactions for single-family homes, townhomes, condos, and co-ops—fell 1.3% compared to December. Still, home sales are up annually for the second consecutive month, with the latest numbers showing a 9.6% gain year over year in January, NAR’s housing report shows.

Here’s a closer look at key indicators from NAR’s latest housing report:

• Home prices: The median existing-home price for all housing types in January was $266,300, up 6.8% from a year ago. Prices rose in every region last month. “Mortgage rates have helped with affordability, but it is supply conditions that are driving price growth,” Yun says.

• Inventories: The total housing inventory at the end of January was 1.42 million units, down 10.7% from a year ago. Housing inventories are at the lowest levels for January since 1999. Unsold inventory is at a 3.1-month supply at the current sales pace.

• Days on the market: Forty-two percent of homes sold in January were on the market for less than a month. Properties stayed on the market for a median of 43 days in January, down from 49 days a year ago.

• All-cash sales: All-cash sales accounted for 21% of transactions in January, down from 23% a year ago. Individual investors and second-home buyers account for the largest bulk of cash sales. They purchased 17% of homes in January, up slightly from 16% a year ago.

• Distressed sales: Foreclosures and short sales comprised just 2% of sales in January, down from a year ago.

Regional Sales Snapshot

• Midwest: sales rose 2.4% in the region, reaching an annual rate of 1.29 million, up 8.4% from a year ago. Median price: $200,000, up 5.4% from January 2019

• South: sales increased 0.4% to an annual rate of 2.38 million in January, up 11.7% from a year ago. Median price: $229,000—a 6.3% increase from a year ago

• West: sales decreased 9.4% in January to an annual rate of 10.6 million, still an 8.2% increase compared to a year ago. Median price: $393,800, up 5.2% from a year ago

• Northeast: sales saw no major movement in January compared to December, remaining at an annual rate of 730,000. That is up, however, 7.4% from a year ago. Median price: $312,100—up 11.5% from a year ago

Source:  National Association of REALTORS®

The #1 Misconception in the Homebuying Process

After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:

 “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.”

CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:

• 21 states appreciating 5% or more

• 26 states appreciating between 3-5%

• Only 3 states appreciating less than 3%

The Misconception

Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.

In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.

Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.

Black Knight, in their latest Mortgage Monitor, addressed this exact issue:

 “Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…

Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”

Bottom Line

If you’re thinking about purchasing a home, realize that homes are still affordable even though prices are increasing. As the Black Knight report concluded:

“Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”

The #1 Reason to List Your House Right 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:

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. Reach out to a local real estate professional to determine if listing your house now is your best move.

How Trusted Professionals Make Homebuying Easier to Understand

In the spring, many excited buyers get ready to enter the housing market. Others continue dreaming about the homes they’d like to buy. The truth is, many potential buyers continue to dream longer than they need to, simply because they’re confused about the homebuying process. Thankfully, working with a trusted real estate professional can help ease those concerns and make the process to homeownership much easier to understand.

A recent survey conducted by Ipson and Freddie Mac reveals the confidence level of Gen Z and Millennial buyers regarding the homebuying process. The graph below shows the breakdown of the top results, clearly indicating there’s a significant portion of younger buyers who are not yet confident with some of the steps in the homebuying process.

Between the homebuying process and the mortgage process, there are 230 possible steps in the transaction. With trusted professionals on your side, you certainly don’t have to know them all to have a successful experience.

There are many reasons why these steps can change as you move through each one. Depending on your personal circumstances, the term or your mortgage, and the type of loan you use, the path you take may need to vary. That’s why guidance and support from the experts is key.

In addition to the process itself, respondents in the survey definitely expressed concerns about understanding the types of loans available. Here are just a few of the basic loans to consider. Be sure to speak with your lender about the specifics of what will work best for you:

• FHA: Loans guaranteed by the Federal Housing Administration for first-time buyers. They generally enable qualified borrowers to enter the housing market with a lower down payment.

• Conventional: Loans that usually require a larger down payment. Repeat buyers usually use these types of loans since they have an established credit history as well as more money from the sale of their previous home (called equity) for a bigger down payment.

• VA: Loans available for Veterans of the U.S. Armed Forces and their spouses. They are guaranteed by the Department of Veteran Affairs.

• USDA: Loans for those living in rural and suburban areas. A qualified lender can issue a USDA home loan, and they are guaranteed by the United States Department of Agriculture (USDA).

Interest rates also popped up as a common area of confusion among Gen Z and Millennial respondents in the survey. With today’s rates hovering at near historic lows, it’s a fantastic time for buyers to get more house for their money in the current market. Why? When mortgage rates are this low and wages are increasing as they are today, overall affordability increases, enabling home buyers to stretch their mortgage dollars further. It’s just another area where a trusted professional can help simplify the process and give guidance along the way.

Bottom Line

There are many possible steps in a real estate transaction, but they don’t have to be confusing. To understand your best course of action, reach out to a local real estate professional, ensuring you have a trusted advisor who will help you feel confident and informed at every turn.

February Real Estate News and Updates