Have you been thinking about putting your house on the market? What about moving-up to the house of your dreams? With supply and demand continuing to raise prices, now may be the perfect time! Let’s get together to discuss why you should list your house for sale this fall!
We all realize that the best time to sell anything is when the demand for that item is high and the supply of that item is limited. The last two major reports issued by the National Association of Realtors (NAR) revealed information that suggests that right now continues to be a great time to sell your house.
Home prices are at the top of everyone’s minds. Can they maintain their current pace of appreciation? Will rising mortgage rates negatively impact home values? Will the next economic slowdown cause prices to crash?
Let’s try to answer these questions based on what has happened in the past as well as what we know about the current real estate market.
The Impact of Rising Interest Rates
We explained earlier this year that rising mortgage rates have not negatively impacted home prices in the past and probably wouldn’t this time either. Freddie Mac’s comments were very direct:
“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”
They were correct. So far this year, home values have continued to appreciate above normal historic percentages and it appears the gradual increase in rates has had little impact on prices.
The Impact of an Economic Slowdown
Many people fear that when the economy turns, we may see the same depreciation in home values as we did a decade ago.
However, we recently reported that the same group of economists, real estate experts, and investment & market strategists who predicted the next recession will occur in the next 18-24 months have also projected that house prices will continue to appreciate for the next five years, albeit at smaller percentages.
It Comes Down to Supply and Demand
As always, home prices will be determined by the demand to purchase compared to the available inventory of homes for sale. For the last six years, demand has far exceeded the available supply which has resulted in the average annual appreciation to top 6% since 2012. That is far greater than the historic norm of 3.6% annual appreciation that we saw prior to the housing boom.
There are currently small signs that housing inventory is slowly beginning to increase. Months supply of houses for sale matched last year’s numbers for the last two months after 37 consecutive months of decreasing inventory. New construction data has also shown positive signs that inventory will be increasing.
As inventory begins to meet demand, we will see appreciation return to more normal levels. We are already seeing projections coming in lower than the 6.2% annual average we have seen more recently.
CoreLogic is predicting that home values will appreciate by 5.1% over the next twelve months and the Home Price Expectation Survey calls for values to increase by 4.2% in 2019.
Mark Fleming, Chief Economist at First American, explained it best:
“We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”
In the ten years since the so-called Great Recession, home values have risen to record highs in many markets and foreclosures have fallen to historic lows. NAR Chief Economist, Lawrence Yun, said “Today, even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory and accompanying unsustainable home price increases.” He forecasts that existing home sales and home prices will rise in 2019.
The Senate approved a bill Tuesday to keep the National Flood Insurance Program operating for four more months.
Source: NFIP Extended to Nov. 30, But Reforms Still Needed
Whether you are a rookie homebuyer or have gone through the process many times, having a local real estate expert who is well versed in the neighborhood you are looking to move to, as well as the trends of that area, should be your goal while home shopping.
One great example of an agent who is in your corner and is always looking out for your best interests is one of the main characters on ABC’s Modern Family, Phil Dunphy.
For those who aren’t familiar with the character, Phil is a REALTOR® with a huge heart who always strives to do his best for his family and his clients.
In one episode, he even shared an oath that he created and holds himself accountable to:
“On my honor, I promise to aid in man’s quest for shelter, to recognize I’m not just in the business of houses — I’m in the business of dreams in the shape of houses. To disclose all illegal additions, shoddy construction, murders, and ghosts. And to put my clients’ needs before my own.”
While this might seem silly, as it was definitely written with humor in mind, the themes of helping someone achieve the American Dream and putting a client’s needs above his own are not to be taken lightly.
When you make the decision to enter the housing market, as either a buyer or a seller, make sure you look for an agent who exemplifies these values and will help you through every step of the process