The State of the Housing Market
N O R T H E A S T F L O R I D A U P D AT E - S P E C I A L E D I T I O N JUST HOW STRONG IS THE HOUSING MARKET? The residential real estate market has definitely been the shining light in our country’s current economic downturn. All-time low mortgage interest rates coupled with a new appreciation of what a home truly means has caused the housing market to push forward despite the pandemic. Let’s look at two measures that explain the resilience of the real estate market.
The number of buyers getting a mortgage to purchase a home is a strong indicator of the strength of a housing market. Below is a graph of the week-over-week percent change in that number, as reported by the Mortgage Bankers Association:
Like purchase mortgages, pending contracts are also a powerful indicator of the strength of the real estate market. Zillow reports each week on the percent change in the number of homes going under contract. Here’s a graph of their data:
Purchase Applications Week-Over-Week Difference
Percent Change in Newly Pended Transactions Week-Over-Week Difference
The number dropped dramatically in March and April when the economy was shut down in response to COVID-19. Purchase applications increased substantially from the end of April through mid-June, as a result of pent up demand from buyers who deferred. Since July, the market has remained consistent on a weekly basis, but still reflects a double-digit increase from the levels one year ago. The August 12 report shows a whopping 22% increase over last year.
The graph mirrors the one to the left, showing a drop in early spring followed by a strong recovery in late spring and early summer. Then, in July, it settles into a consistent level of transactions. That level, like the one for purchase mortgages, is well ahead of last year. The last report revealed that pending transactions were up 16.9% than the same time last year.
BOTTOM LINE: Both indicators prove the housing market recovered quickly from the early setback caused by the shelter-in-home orders. They also reflect the continued confidence buyers have in homeownership year after year. Source: Keeping Current Matters ©2020 BHH Affiliates, LLC. An independently operated subsidiary of HomeServices of America, Inc., a Berkshire Hathaway affiliate, and a franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of Columbia Insurance Company, a Berkshire Hathaway affiliate. Equal Housing Opportunity. Information not verified or guaranteed. If your home is currently listed with a Broker, this is not intended as a solicitation
NATIONALLY: SELLERS ARE RETURNING TO THE HOUSING MARKET In today’s housing market, it can be a big challenge for buyers to find homes to purchase, as the number of houses for sale is far below the current demand. Now, however, we’re seeing sellers slowly starting to come back into the market, a bright spark for potential buyers. Javier Vivas, Director of Economic Research at Realtor.com, explains: “Seller confidence has been improving gradually after reaching its bottom in mid-April, and now it appears to have reached an important recovery milestone…After five long months, sellers are back in the housing market; while encouraging, the improvement to new listings is only the first step in the long road to solving low inventory issues keeping many buyers at bay.” Even with the number of homes coming into the market, the available inventory is well below where it needs to be to satisfy buyer interest. The National Association of Realtors (NAR) reports: “Total housing inventory at the end of June totaled 1.57 million units, up 1.3% from May, but still down 18.2% from one year ago (1.92 million). Unsold inventory sits at a 4.0-month supply at the current sales pace, down from both 4.8 months in May and from the 4.3-month figure recorded in June 2019.” Houses today are selling faster than they’re coming to market. That’s why we only have inventory for four months at the current sales pace when in reality we need inventory for six months to keep up. But sellers are starting to return to the game. Realtor.com explains: “The ‘housing supply’ component – which tracks growth of new listings – reached 101.7, up 4.9 points over the prior week, finally reaching the January growth baseline. The big milestone in new listings growth comes as seller sentiment continues to build momentum…After constant gradual improvements since mid-April, seller confidence appears to be reaching an important milestone. The temporary boost in new listings comes as the summer season replaces the typical spring homebuying season. More homes are entering the market than typical for this time of the year.”
WHY IS THIS GOOD FOR SELLERS?
WHY IS THIS GOOD FOR BUYERS?
A good time to enter the housing market is when the competition in your area is low, meaning there are fewer sellers than interested buyers. You don’t want to wait for all of the other homeowners to list their houses before you do, providing more options for buyers. Sellers are starting to get back into the market after five months of waiting. If you want to sell your house for the best possible price, now is a great time to do so.
It can be challenging to find a home in today’s low inventory environment. If more sellers are starting to put their houses up for sale, there will be more homes for you to choose from, providing a better opportunity to find the home of your dreams while taking advantage of the affordability that comes with historically low mortgage rates.
BOTTOM LINE: While we still have a long way to go to catch up with the current demand, inventory is slowly starting to return to the market. If you’re thinking of moving this year, connect with a local real estate professional today to better understand what’s happening in your local market. You’ll want to be ready to make your move when the home of your dreams comes up for sale.
Florida Network Realty
Source: Keeping Current Matters
LOCALLY: SELLERS WANTED! SELLERS NEEDED! SELLERS REWARDED! Active listings in the Northeast Florida region (all three area MLSs included covering a majority of Northeast Florida) are down 28% from same month last year to 9,030 units. Pending Sales are up 47% to 6,320. This continued supply and demand imbalance will continue to drive prices higher. The most recent month’s data shows that the median sales price increased 10% percent over July 2019 to $265,000. Months supply of inventory was down 32% percent to 2.48 months. The lower the number, the hotter the market! MONTHS OF INVENTORY The number of months it would take to exhaust active listings at the current sales rate. Filters Used
All defaults used Month/Year Months July 2020 July 2019 July 2018
2.48 -32.2% 3.66 7.3% 3.41 -12.6%
0 Jul ‘19
Percent Change from Prior Year
This is an amazing environment sellers – that is, for today’s sellers. The concern is for would-be sellers next year and beyond. When the market stays too hot for too long, home prices outpace employment and income levels. The end result is an affordability issue, which can negatively impact prices. Jacksonville has been and continues to be one of the top 10 cities for migratory growth, so the simple truth is we need more homes on the market to support people moving to the area. Builders are helping in some of our counties: ANNUAL STARTS BY COUNTY Baker Camden Clay
POSITIVE NET MIGRATION
2018-2019* 1. Austin
Duval Nassau St. Johns
3. Las Vegas
4. Raleigh +20%
5. Jacksonville 6. Tampa 7. Charlotte
8. San Antonio -3%
9. Tucson 10. Nashville
BOTTOM LINE: Locally, this is one of the best markets in history to be a home seller with home values rising and very little competition due to low inventory. Rarely do we see a market that favors both buyers and sellers, but in this case buyers are benefiting from extraordinarily low interest rates. The risks: prices moving too high compared to incomes and interest rates rising. If you are considering a move in the next few years, I can help you analyze your home’s value in this incredible environment and develop a plan for you to secure a purchase as well. Source: Current as of August 19, 2020. All data from Realtor Property Resource.
THE TOP REASONS PEOPLE ARE MOVING THIS YEAR The current health crisis has truly reshaped our lifestyles and our needs. Spending extra time where we currently live is empowering many families to re-evaluate what homeownership means and what they find most important in a home. According to Keeping Current Matters: In 2020, homes went from the place people returned to after work, school, hitting the gym or vacationing, to the place where families do all of the above. For those who now spend the majority of their hours at home, there’s a growing wish list of what they’d change about their homes, if possible. With a new perspective on homeownership, here are the top reasons people are reconsidering what they want in a home if they are making moves this year.
#1 WORKING FROM HOME
#3 A HOME GYM
Remote work is becoming the new norm in 2020, and it’s continuing on longer than most initially expected. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR) notes:
With concerns surrounding the safety of returning to health clubs across the country, dreams of space for a home gym are growing stronger. For many in quarantine, a significant decrease in activity is more than a vanity issue – it’s a mental health issue. Having room to maintain a healthy lifestyle at home – mentally and physically – may prompt you to consider a new place to live that includes space for at-home workouts.
With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021. If you’ve tried to convert your guest room or your dining room into a home office with minimal success, it may be time to find a larger home. Your current house may not be optimally designed for a home office, making remote work and continued productivity very challenging.
#2 VIRTUAL SCHOOLING With the school year underway, many districts are beginning the new academic year online. Education Week is tracking the reopening plans of schools across the country. As of August 21, 21 of the 25 largest school districts are choosing remote learning as their back-to-school instructional model, affecting over 4.5 million students. With a need for a dedicated learning space, it may be time to find a larger home to provide your children with the same kind of quiet room to focus on their schoolwork.
#4 OUTDOOR SPACE Especially for those living in an apartment or a small townhouse, this is a new priority. People want more space in their next home, and one way to get it is by turning part of the backyard into a functional room. You may not have the extra square footage today to have these designated areas – indoors or out.
MOVING MAY BE YOUR BEST OPTION If you’re clamoring for extra space to accommodate your family’s changing needs, making a move may be your best bet, especially while you can take advantage of today’s low mortgage rates. Buying power for those shopping for a home is up 10% year-over-year, with home buyers able to afford nearly $32,000 more home than they could have a year ago while keeping their monthly payment the same.
BOTTOM LINE: People are moving for a variety of different reasons today, and many families’ needs have changed throughout the year. If you’ve been trying to decide if now is the time to buy a new home, let’s connect to discuss your needs.
Source: Keeping Current Matters