Baby Boomers are Downsizing, Are You Ready to Move?

Baby Boomers are Downsizing, Are You Ready to Move? | Simplifying The Market

For a while now baby boomers have been blamed for a portion of the housing market’s current lack of housing inventory, but should they really be getting the blame?

Here’s what some of the experts have to say on the subject:

Aaron Terrazas, Senior Economist at Zillow, says that “Boomers are healthier and working longer than previous generations, which means they aren’t yet ready to sell their homes.”

According to a study by Realtor.com, 85% of baby boomers indicated they were not planning to sell their homes.

It is true that baby boomers are healthier and are thus working and living longer, but are they also refusing to sell their homes? 

Last month, Trulia looked at the housing situation of seniors (aged 65+) today compared to that of a decade ago. Trulia’s study revealed that:

“Although seniors appear to be delaying downsizing until later in life, as a group, households 65 and over are still downsizing at roughly the same rate as in years past.”

Trulia also explains that, 

“5.5% of households 65 and over moved, pretty evenly split between moves to single family (2.7%) and multifamily (2.4%) homes. In 2005, these percentages were virtually the same, with 5.5% of senior households moving, including 2.5% into single family and 2.5% into multifamily homes.”

So, if these percentages are the same, what is the challenge?

Recent reports tell us that the older population grew from 3 million in 1900 to 47.8 million in 2017.

In addition, the Census recently revised the numbers from their National Population Projections:

“The aging of baby boomers means that within just a couple decades, older people are projected to outnumber children for the first time in U.S. history…By 2035, there will be 78.0 million people 65 years and older compared to 76.7 million under the age of 18.”

Bottom Line

If you are a baby boomer who is not sure whether you should downsize or move to a warmer climate (other people are doing it, why not you?), let’s get together so we can help you evaluate your options today!


Source: KMC

Dispelling the Myth About Home Affordability

Dispelling the Myth About Home Affordability | Simplifying The Market

We have all seen the headlines that report that buying a home is less affordable today than it was at any other time in the last ten years, and those headlines are accurate. But, have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?

The reason is that homes were less affordable 25, 20, or even 11 years ago than they are today.

Obviously, buying a home is more expensive now than during the ten years immediately following one of the worst housing crashes in American history.

Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) that were selling at 10-50% discounts. There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.

Low Prices + Low Mortgage Rates = High Affordability

Prices have since recovered and mortgage rates have increased as the economy has gained strength. This has and will continue to impact housing affordability moving forward.

However, let’s give affordability some historical context. The National Association of Realtors (NAR) issues their Affordability Index each month. According to NAR:

“The Monthly Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent monthly price and income data.”

NAR’s current index stands at 138.8. The index had been higher each of the last ten years, peaking at 197 in 2012 (the higher the index the more affordable houses are).

But, the average index between 1990 and 2007 was just 123 and there were no years with an index above 133. That means that homes are more affordable today than at any time during the eighteen years between 1990 and 2007.

Bottom Line

With home prices continuing to appreciate and mortgage rates increasing, home affordability will likely continue to slide. However, this does not mean that buying a house is not an attainable goal in most markets as it is less expensive today than during the eighteen-year stretch immediately preceding the housing bubble and crash.


Source: KMC

New Home Sales Up 12.7% From Last Year

New Home Sales Up 12.7% From Last Year | Simplifying The Market

According to the latest New Residential Sales Report from the Census Bureau, new construction sales in August were up 3.5% from July and 12.7% from last year! This marks the second consecutive month with double-digit year-over-year growth (12.8% in July).

The report also showed that builders have ramped up construction with an increase in new construction starts and completions. The summer months are often a busy time for builders as they capitalize on the warmer weather to be able to finish projects.

Below is a table showing the change in starts, completions, and sales from last August.

New Home Sales Up 12.7% From Last Year | Simplifying The Market

Other notable news from the report is that the percentage of new construction sales in the $200-$299k range has continued to break away from the $300-$399k range.

This shows that builders are starting to build lower-priced homes that will help alleviate some of the inventory challenges in the starter and trade-up home categories. The chart below shows the full breakdown.

New Home Sales Up 12.7% From Last Year | Simplifying The Market

What does this mean for buyers and sellers?

If you are thinking of buying or selling in today’s market, you no doubt have heard that there is a shortage of existing homes for sale which has been driving home prices up across the country. The additional new construction coming to the market could help alleviate this shortage, but we are still not back up to pre-crisis levels.


Source: KMC

Are We About to Enter a Buyers’ Market?

Are We About to Enter a Buyers’ Market? | Simplifying The Market

Home sales are below last year’s levels, home values are appreciating at a slower pace, and there are reports showing purchasing demand softening. This has some thinking we may be entering a buyers’ market after sellers have had the upper hand for the past several years. Is this really happening?

The market has definitely softened. However, according to two chief economists in the industry, we are a long way from a market that totally favors the purchaser:

Dr. Svenja Gudell, Zillow Chief Economist:

“These seller challenges don’t indicate we’re suddenly in a buyers’ market – we don’t expect market conditions to shift decidedly in favor of buyers until 2020 or later. But buyers certainly are starting to balk at the rapid rise in prices and home values are starting to grow at a less frenetic pace.”

Danielle Hale, Chief Economist of realtor.com:

“The signs are pointing to a market that’s shifting toward buyers. But, in most places, we’re still a long way from a full reversal.”

In addition, Pulsenomics Inc. recently surveyed over one hundred economists, real estate experts, and investment & market strategists and asked this question:

“When do you expect U.S. housing market conditions to shift decidedly in favor of homebuyers?”

Only 5% said the market has already shifted. Here are the rest of the survey results:

Are We About to Enter a Buyers’ Market? | Simplifying The Market

Bottom Line

The market is beginning to normalize but that doesn’t mean we will quickly shift to a market favoring the buyer. We believe Ivy Zelman, author of the well-respected ‘Z’ Report, best explained the current confusion:

“With the rate of home price appreciation starting to decelerate alongside the uptick in inventory…we expect significant debate about whether this is a bullish or bearish sign.

In our view, the short-term narrative will probably be confusing, but more sustainable growth and affordability will likely be the end result.”


Source: KMC

Are Home Prices Softening or Are They Falling?

Are Home Prices Softening or Are They Falling? | Simplifying The Market

We are beginning to see reports that more housing inventory is coming to the market and that buyer demand may not be increasing at the same pace it did earlier this year. The result will be many headlines written to address the impact that these two situations will have on home values.

Many of these headline writers will confuse “softening home prices” with “falling home prices,” but there is a major difference between the two.

The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices). This does NOT mean that prices are depreciating (falling prices).

Here is an example: Over the last several years, national home values increased by more than 6% annually. If you had a home worth $300,000 at the beginning of the year, it would be worth $318,000 by year’s end. If the appreciation rate “falls” to 4%, that $300,000 house would be worth $312,000 at the end of next year – a $6,000 difference.

The price of the home did not fall. It just didn’t increase at the level it had the previous year.

Appreciation rates are projected to end this year at approximately 5%, and then drop to somewhere between 4-5% next year. This drop in appreciation rate will cause home price increases to soften.

Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.

Bottom Line

Be careful when reading headlines that discuss home values. Some headline writers will be legitimately confused and will use the word falling in place of softening. Others will realize that the headline “Home Prices are Falling!” will get more clicks than “Home Prices are Softening” and will intentionally write the more compelling headline. Read the article. If the word depreciation is not mentioned, home values are not falling.


Source: KMC

How Much Has Your Home Increased in Value?

How Much Has Your Home Increased in Value? | Simplifying The Market

Home values have risen dramatically over the last twelve months. In CoreLogic’s most recent Home Price Index Report, they revealed that national home prices have increased by 6.2% year-over-year.

CoreLogic broke down appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price.

The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from July 2017 to July 2018 (the latest data available). 

How Much Has Your Home Increased in Value? | Simplifying The Market

It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor which determines how much your home has appreciated over the course of the last year.

Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.

Bottom Line

If you are planning to list your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.


Source: KMC

Is the Real Estate Market Finally Getting Back to Normal?

Is the Real Estate Market Finally Getting Back to Normal? | Simplifying The Market

The housing market has been anything but normal for the last eleven years. In a normal real estate market, home prices appreciate 3.7% annually. Below, however, are the price swings since 2007 according to the latest Home Price Expectation Survey:

After the bubble burst in June 2007, values depreciated 6.1% annually until February 2012. From March 2012 to today, the market has been recovering with values appreciating 6.2% annually.

These wild swings in values were caused by abnormal ratios between the available supply of inventory and buyer demand in the market. In a normal market, there would be a 6-month supply of housing inventory.

When the market hit its peak in 2007, homeowners and builders were trying to take advantage of a market that was fueled by an “irrational exuberance.”

Inventory levels grew to 7+ months. With that many homes available for sale, there weren’t enough buyers to satisfy the number of homeowners/builders trying to sell, so prices began to fall.

Then, foreclosures came to market. We eventually hit 11 months inventory which caused prices to crash until early 2012. By that time, inventory levels had fallen to 6.2 months and the market began its recovery.

Over the last five years, inventory levels have remained well below the 6-month supply needed for prices to continue to level off. As a result, home prices have increased over that time at percentages well above the appreciation levels seen in a more normal market. 

That was the past. What about the future?

We currently have about 4.5-months inventory. This means prices should continue to appreciate at above-normal levels which most experts believe will happen for the next year. However, two things have just occurred that are pointing to the fact that we may be returning to a more normal market.

1. Listing Supply is Increasing

Both existing and new construction inventory is on the rise. The latest Existing Home Sales Report from the National Association of Realtors revealed that inventory has increased over the last two months after thirty-seven consecutive months of declining inventory. At the same time, building permits are also increasing which means more new construction is about to come to market. 

2. Buyer Demand is Softening

Ivy Zelman, who is widely respected as an industry expert, reported in her latest ‘Z’ Report:

 “While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets.

Indicative of this, our broker contacts rated buyer demand at 69 on a 0- 100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”

With supply increasing and demand waning, we may soon be back to a more normal real estate market. We will no longer be in a buyers’ market (like 2007-February 2012) or a sellers’ market (like March 2012- Today).

Prices won’t appreciate at the levels we’ve seen recently, nor will they depreciate. It will be a balanced market where prices remain steady, where buyers will be better able to afford a home, and where sellers will more easily be able to move-up or move-down to a home that better suits their current lifestyles.

Bottom Line

Returning to a normal market is a good thing. However, after the zaniness of the last eleven years, it might feel strange. If you are going 85 miles per hour on a road with a 60 MPH speed limit and you see a police car ahead, you’re going to slow down quickly. But, after going 85 MPH, 60 MPH will feel like you’re crawling. It is the normal speed limit, yet, it will feel strange.

That’s what is about to happen in real estate. The housing market is not falling apart. We are just returning to a more normal market which, in the long run, will be much healthier for you whether you are a buyer or a seller.


Source: KMC

25% of Homes with a Mortgage are Now Equity Rich!

25% of Homes with a Mortgage are Now Equity Rich! | Simplifying The Market

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

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

According to the latest Equity Report from ATTOM Data Solutions, “13.9 million U.S. properties in Q2 2018 were equity rich — where the combined estimated balance of loans secured by the property was 50 percent or less of the property’s estimated market value — representing 24.9% of all U.S. properties with a mortgage.”

This means that nearly a quarter of Americans who have a mortgage would be able to sell their homes and have a significant down payment toward their next home. Many who sell could also use their new-found equity to pay off high-interest credit cards or help children with tuition costs.

The map below shows the percentage of properties with a mortgage in each state that were equity rich in Q2 2018.

25% of Homes with a Mortgage are Now Equity Rich! | Simplifying The Market

Bottom Line

If you are a homeowner looking to take advantage of your home equity by moving up to your dream home, let’s get together to discuss your options!


Source: KMC

If You Are Thinking of Selling? You Must Act NOW!

If You Are Thinking of Selling? You Must Act NOW! | Simplifying The Market

If you thought about selling your house this year, now more than ever may be the time to do it! The inventory of homes for sale is well below historic norms and buyer demand is skyrocketing. We were still in high school when we learned about the concept of supply and demand, so we understand that the best time to sell something is when the supply of that item is low and demand for that item is high. That defines today’s real estate market.

Lawrence Yun, Chief Economist at the National Association of Realtors, recently commented:

“Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity.”

Yun goes on to say:

“The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”

In this type of market, a seller may hold a major negotiating advantage when it comes to price and other aspects of the real estate transaction, including the inspection, appraisal and financing contingencies.

Bottom Line

As a potential seller, you are in the driver’s seat right now. It might be time to hit the gas.


Source: KMC

If You Are Thinking of Selling You Must Act NOW!

If You Are Thinking of Selling? You Must Act NOW! | Simplifying The Market

If you thought about selling your house this year, now more than ever may be the time to do it! The inventory of homes for sale is well below historic norms and buyer demand is skyrocketing. We were still in high school when we learned about the concept of supply and demand, so we understand that the best time to sell something is when the supply of that item is low and demand for that item is high. That defines today’s real estate market.

Lawrence Yun, Chief Economist at the National Association of Realtors, recently commented:

“Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity.”

Yun goes on to say:

“The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”

In this type of market, a seller may hold a major negotiating advantage when it comes to price and other aspects of the real estate transaction, including the inspection, appraisal and financing contingencies.

Bottom Line

As a potential seller, you are in the driver’s seat right now. It might be time to hit the gas.


Source: KMC