The Winter Housing Market Forecast Won’t Be Chilly

The Winter Housing Market Forecast Won’t Be Chilly

This year has been full of surprises, but the biggest might be how exceptional the housing market is performing, National Association of Realtors Chief Economist Lawrence Yun said on Tuesday.

In a panel at the NAR 2020 Realtors Conference and Expo, Yun discussed what a Biden presidency could mean for the housing market, the future of mortgage rates and how to remedy low housing inventory.

One pandemic trend in the housing market has been the increase of homeowners relocating to the suburbs and vacation towns. Now that work-from-home policies have been implemented for many, employees don’t need to live in cities anymore. In fact, Yun said that working from home has made office occupancies decrease by nearly 41%.

While working from home has become widespread during the pandemic, Yun said that he believes this trend will continue once a vaccine has been distributed.

“…If one does not have to commute every single day, then people may say ‘well I don’t mind living further out from the downtown areas’,” Yun said.

Another pandemic trend is homeowners are relocating to bigger, more expensive homes. Not only that, but more homes are becoming multi-generational. 

“The rise in prices partly reflects that people are buying larger size homes, so prices are rising,” Yun said. “But if you look at the constant quality price index, like Case Shiller or FHFA…it is also beginning to show slight acceleration. And I anticipate as more data becomes available, it will show even greater acceleration based on the trend of the multiple offers.”

Housing inventory has remained lower than ever this year. Yun said one thing that could encourage builders to create more inventory would be removing tariffs and bringing down the price of lumber.

Going forward, Yun said that the homeownership rate could be challenged because “we simply don’t have enough supply.”

“Not enough homes for sale means multiple offers, prices rising too fast, and it may limit some of the renters from becoming owners,” Yun said.

Mortgage rates have also been lower than ever this year, helping the housing market. Yun predicts that in 2021, mortgage rates will stay roughly the same.

“It was two days ago when Freddie Mac’s CEO said he is resigning, and I think that’s based on the decision that Joe Biden will be the incoming president, because he may have perceived that Fannie and Freddie perhaps could be privatized under President Trump,” Yun said.

“But now under Joe Biden, he will be widening of the government guarantee, which means that mortgage rates should remain very low without the privatization because we want to ensure that Fannie and Freddie do not make a mistake of chasing after subprime lending as what happened 10 years ago, but just serve the role of homeownership to assure that government guarantee provides the lowest interest rates for credible homebuyers.”

Over the summer, housing markets remained busy due to pent up demand from spring-time homebuyers waiting out the pandemic. Yun said that winter should remain busy as well, and even into spring 2021.

“Pending contracts are up strongly, implying that this winter may be one of the best winters for home sales activity,” Yun said. “I mean, it’s not going to be spring or summer, so one has to compare this winter with other past winters. And by winter to winter comparison, this year could be one of the best based on the breakout of the pending contracts at a much higher level.”

Source: “Hot Housing Market Likely Won’t Cool in Winter,” realtor.com® (Nov. 3, 2020)
Three Ways to Win in a Bidding War

Three Ways to Win in a Bidding War

With so few houses for sale today and low mortgage rates driving buyer activity, bidding wars are becoming more common. Multiple-offer scenarios are heating up, so it’s important to get pre-approved before you start your search. This way, you can put your best foot forward – quickly and efficiently – if you’re planning to buy a home this season.

Javier Vivas, Director of Economic Research at realtor.com, explains:

“COVID-19 has accelerated earlier trends, bringing even more buyers than the market can handle. In many markets, fierce competition, bidding wars, and multiple offer scenarios may be the common theme in the weeks to come.”

Here are three things you can do to make your offer a competitive one when you’re ready to make your move.

1. Be Ready

A recent survey shows that only 52% of active homebuyers obtained a pre-approval letter before they began their home search. That means about half of active buyers missed out on this key part of the process.

Buyers who are pre-approved are definitely a step ahead when it’s time to make an offer. Having a pre-approval letter indicating you’re a qualified buyer shows sellers you’re serious. It’s often a deciding factor that can tip the scale in your direction if there’s more than one offer on a home. It’s best to contact a mortgage professional to start your pre-approval process early, so you’re in the best position right from the start of your home search.

2. Present Your Best Offer

In a highly competitive market, it’s common for sellers to pick a date and time to review all offers on a house at one time. If this is the case, you may not have an opportunity to negotiate back and forth with the sellers. As a matter of fact, the National Association of Realtors (NAR) notes:

“Not only are properties selling quickly, but they are also getting more offers. On average, REALTORS® reported nearly three offers per sold property in July 2020.”

Make sure the offer you’re presenting is the best one the sellers receive. A real estate professional can help you make sure your offer is a fair and highly competitive one.

3. Act Fast

With existing homes going like hotcakes, there’s no time to waste in the process. NAR reports how the speed of home sales is ramping up:

“Properties typically remained on the market for 22 days in July, seasonally down from 24 days in June and from 29 days in July 2019. Sixty-eight percent of homes sold in July 2020 were on the market for less than a month.”

In addition, NAR notes:

Total existing-home salesjumped 24.7% from June to a seasonally adjusted annual rate of 5.86 million in July. The previous record monthly increase in sales was 20.7% in June of this year. Sales as a whole rose year-over-year, up 8.7% from a year ago (5.39 million in July 2019).”

As you can see, the market is gaining steam. For two consecutive months houses have sold very quickly. Essentially, you may not have time to sleep on it or shop around when you find a home you love. Chances are, someone else loves it too. If you take your time, it may not be available when you’re ready to commit.

Bottom Line

The housing market is very strong right now, and buyers are scooping up available homes faster than they’re coming to market. If you’re planning to purchase a home this year, give us a call to learn more about your area, so you’re ready to compete – and win.

The Economic Impact of Buying a Home

The Economic Impact of Buying a Home

With businesses starting to slowly open back up again in some parts of the country, it’s important to understand how housing can have a major impact on the recovery of the U.S. economy. As we’ve mentioned before, buying a home is a driving financial force in this process. Today, many analysts believe one of the first things we’ll be able to safely bring back is the home building sector, creating more jobs and impacting local neighborhoods in a big way. According to Robert Dietz in The Eye on Housing:

 “The pace of new home sales will post significant declines during the second quarter due to the impacts of higher unemployment and shutdown effects of much of the U.S. economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will help lead the economy in the eventual recovery.”

The National Association of Home Builders (NAHB) notes the impact new construction can have on the job market:

“Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for all levels of government to support police, firefighters and schools, according to NAHB’s National Impact of Home Building and Remodeling report.”

These employment opportunities, along with the home purchase, drive the economy in a major way. The National Association of Realtors (NAR) recently shared a report that notes the full economic impact of home sales. This report summarizes:

“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”

Here’s the breakdown of how the average home sale boosts the economy:Why the Housing Market Is a Powerful Economic Driver | MyKCM

As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:

“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products. Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”

The same NAR report also breaks down the average economic impact by state:Why the Housing Market Is a Powerful Economic Driver | MyKCM

On an emotional level, what’s most important for today’s consumers to feel confident about is the safety component that goes into the process. Mitigating the risk of essential personnel at this moment in time is more crucial than ever as we all aim to reduce the spread of the coronavirus. Fortunately, the NAHB has put immense effort into a plan that prioritizes the health and safety of home builders and contractors:

“This is why NAHB and construction industry partners have developed a Coronavirus Preparedness and Response Plan specifically tailored to construction job sites. The plan is customizable and covers areas that include manager and worker responsibilities, job site protective measures, cleaning and disinfecting, responding to exposure incidents, and OSHA record-keeping requirements.”

Bottom Line

Buying a home is a substantial economic driver today, and when new construction picks back up again, it will be an even stronger recovery force throughout the country. If you’re in a position to buy a home this year, you can have a significant impact on your local neighborhoods and safely make the move you’ve been waiting for. It’s a win-win.

How Owning a Home Can Make You Happier

How Owning a Home Can Make You Happier

Homeownership comes with all sorts of struggles that renters never deal with. If you rent and your roof leaks, for example, a call to your landlord fixes that (or it should). You don’t have to worry about unexpected expenses, fluctuating property values, or much of anything else.

Despite the advantages of renting, 93% of Americans said they’re happier after buying a home, according to the latest Bank of America Homebuyer Insights Report. In addition, 83% said they would never go back to renting.
“The latest Homebuyer Insights Report confirms what we suspected: Owning a home makes us happier for two reasons — building personal wealth and making valuable memories,” said AJ Barkley, Bank of America’s Head of Neighborhood Lending, in an email to Millionacres.

Most homeowners credit their happiness to an emotional attachment to their home, but, interestingly, they are also more satisfied with their financial well-being than non-owners. Ultimately, no matter how Americans define home, they agree it is a way towards a more stable, happier, way of life.

If it makes you happy

Homeownership has long been a part of the American Dream. The idea that you’re supposed to buy a home as you start a family has become ingrained in American culture. It’s a right of passage that shows a level of financial success and emotional maturity, as it’s not always an easy process to navigate.

More homeowners (77%) reported being satisfied with their financial well-being than non-owners (42%), according to the report. In fact, over two-thirds of respondents said that “their relationships with family and loved ones have changed since purchasing a home.” 50% said they felt “a restored sense of family pride and attachment to loved ones.”

Essentially, even though owning a home comes with a certain level of stress, it checks off other boxes that make the stress worth it. It’s not just about the perceived financial security that owning a home brings, it’s also about putting down roots and having a base for your family.

How to be even happier

Nothing ruins happiness like financial strain. That’s why homebuyers should act rationally and not let emotions cause mistakes that could have a long-lasting impact.

The first thing to do is make sure you can afford the home you buy. Many recommend the 28% rule. That means no more than 28% of your gross income should go to paying your mortgage each month. Lenders may use that number to consider whether to approve your mortgage. Of course, if you spend less, that could be even better.

If you buy a home you can easily afford, that leaves you money for the future if things go wrong. It also lets you build up an emergency fund and replenish savings depleted from a down payment.

People often assume their income will stay the same or keep climbing and are tempted to buy the most expensive house they can afford. That’s a dangerous decision, as nobody can predict when they might face a personal crisis that impacts their income.

If you want your home to make you happy in the long term, make sure it never becomes a financial burden. One way to do that is to aim in the middle or toward the bottom of what you can afford when making the purchase.

This post originally appeared on Millionacres.

3 Tips for Making Your Dream Home a Reality

3 Tips for Making Your Dream Home a Reality

Automate Your Down Payment Savings

Set up your checking account to automatically save a certain amount each month.

Build Your Credit History and Keep it Clean


Pay any loans or credit cards you may have on time.  Don’t use more than 30% of the credit available to you.

Practice Living on a Budget


95% of first-time buyers were willing to make sacrifices to buy their home faster such as new clothes, a new car, and traveling.

Dreaming of a new home in the new year?

We can help make sure you’re making all the right moves to make homeownership your reality.