Today I will cover 4 topics
- The RE Market -Housing Inventory- rising, sales declining WHY?
- Affordability - has declined
- Interest Rates -have risen sharply
- Recession- Realities vs Fears
BIG PICTURE
Let’s focus on facts vs bubbles and crashes
The sentiments of buying are important to evaluate what direction a market is heading
Here’s the facts. Inventory is rising BUT housing is becoming more affordable. Excellent
What’s going on in real estate? On a National scale year-to-date home sales are about 15% below 2021.
Truth is…
We are still in still in seller’s market, but it is not as crazy as it was, when Sellers could ask the sun moon and stars price and had to bid $100k over list price. Remember that?
National Association of realtors confidence index - focusing on their short term data
- 82% of respondents reported properties sold in less than one month. Down from 88% a month ago - Homes listed received an average of 2.8 offers, vs 3.4 offers in June 2022
- First-time buyers represented 29% virtually unchanged from one year ago and one month ago
- 24% of buyers were all-cash , similar to last month at 25%
What about AUSTIN TEXAS (the SOUTH) today?
1)Existing Home Sales
In Austin, Inventory is up from 1.8 months to 2.7 months supply - Remember 2019?
Days on market are up to 22 days vs 10 days
Uh oh, SOMEBODY SAID THE SKY IS FALLING -
Active listings rose in July by 167%
Pending Sales declined by 25%
2)What is your Afford-ability
The monthly mortgage payment rose to $1944 from $1265 an increase of 53.7% compared to one year ago
From NAR The mid August
Affordability index
Right now affordability sits at 98.5% of the average mortgage payment.
It is just 1.5% below what average earner can afford.
100% means average person can afford average priced home.
- Prices were already high
- Interest Rates -went from 3.03 to 5.60% shrinking the affordability for many
SIDEBAR
ALI WOLF - Chief Economist for Zonda featured on bloomberg shares
We are in a historic affordability crisis
Generally speaking -Buyers -unless they’re really active in the market are not as aware of rates - but the trickle down has affected consumers who are out there (Competitively speaking when making offers)- it feels better than a few months ago.
The Intense sellers market - over asking price is lessening
Across the country a buyer friendly market is coming back
Again Keep consumer confidence in mind when considering future market activity
Rates
REMEMBER THE MOST Basic concept
Quickly rising interest rates tend to slow home price appreciation.
Rates went from 3.03 to 5.60%.
What does the future hold? Without a crystal ball we don’t know.
THE FEAR OF RECESSION 49% say per the Wall Street Journal that a recession is coming
What Happens TO rates in a Recession ?
quoting Ali wolf again
Rates fall during a recession
“Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.” -FORTUNE
Looking at housing starts
Builders slow housing starts in response to reduced activity. This market is different because builders react more quickly. As housing starts slow the labor pressure becomes less intense- this is good for the market.
Is the market gonna crash?
“We are in a place where strategy discussions and planning are critically important to make sure we can thrive during these challenging times. Stay nimble, stay informed, and remember: HOUSING is traditionally one of the first sectors to slow as the economy shifts but is also one of the first to rebound " Ali Wolf Chief Economist ZONDA
To summarize
- The RE Market -Home Sales and Housing Inventory- rising
- Affordability - may or may not affect you -depending upon what kind of buyer you are
- Interest Rates - 2022 clearly up from 2020 2021 but this is giving you breathing room
- Recession Realities -Recession does not always mean a housing crash and going forward if history repeats itself we could see interest rates fall again
In our next episode will switch gears and discuss how to become a Financially Savvy Seller!