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Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash

Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash | Simplifying The Market

Whether or not you owned a home in 2008, you likely remember the housing crash that took place back then. And news about an economic slowdown happening today may bring all those concerns back to the surface. While those feelings are understandable, data can help reassure you the situation today is nothing like it was in 2008.

One of the key reasons why the market won’t crash this time is the current undersupply of inventory. Housing supply comes from three key places:

  • Current homeowners putting their homes up for sale
  • Newly built homes coming onto the market
  • Distressed properties (short sales or foreclosures)

For the market to crash, you’d have to make a case for an oversupply of inventory headed to the market, and the numbers just don’t support that. So, here’s a deeper look at where inventory is coming from today to help prove why the housing market isn’t headed for a crash.

Current Homeowners Putting Their Homes Up for Sale

Even though housing supply is increasing this year, there’s still a limited number of existing homes available. The graph below helps illustrate this point. Based on the latest weekly data, inventory is up 27.8% compared to the same week last year (shown in blue). But compared to the same week in 2019 (shown in the larger red bar), it’s still down by 42.6%.

Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash | Simplifying The Market

So, what does this mean? Inventory is still historically low. There simply aren’t enough homes on the market to cause prices to crash. There would need to be a flood of people getting ready to sell their houses in order to tip the scales toward a buyers’ market. And that level of activity simply isn’t there.

Newly Built Homes Coming onto the Market

There’s also a lot of talk about what’s happening with newly built homes today, and that may make you wonder if we’re overbuilding. But home builders are actually slowing down their production right now. Ali Wolf, Chief Economist at Zonda, notes:

“It has become a very competitive market for builders where they are trying to offload any standing inventory.”

To avoid repeating the overbuilding that happened leading up to the housing crisis, builders are reacting to higher mortgage rates and softening buyer demand by slowing down their work. It’s a sign they’re being intentional about not overbuilding homes like they did during the bubble.

And according to the latest data from the U.S. Census, at today’s current pace, we’re headed to build a seasonally adjusted annual rate of about 1.4 million homes this year. While this will add more inventory to the market, it’s not on pace to create an oversupply because builders today are more cautious than the last time when they built more homes than the market could absorb.

Distressed Properties (Short Sales or Foreclosures)

The last place inventory can come from is distressed properties, including short sales and foreclosures. Back in the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to secure a home loan they couldn’t truly afford. Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from ATTOM Data Solutions on properties with foreclosure filings to help paint the picture of how things have changed since the crash:

Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash | Simplifying The Market

This graph shows how in the time around the housing crash there were over one million foreclosure filings per year. As lending standards tightened since then, the activity started to decline. And in 2020 and 2021, the forbearance program was a further aid to help prevent a repeat of the wave of foreclosures we saw back around 2008.

That program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.

Bottom Line

Although housing supply is growing this year, the market certainly isn’t anywhere near the inventory levels that would cause prices to drop significantly. That’s why inventory tells us the housing market won’t crash.

3 Tips for Buying a Home Today

3 Tips for Buying a Home Today | Simplifying The Market

If you put off your home search at any point over the past two years, you may want to consider picking it back up based on today’s housing market conditions. Recent data shows the supply of homes for sale is increasing, giving buyers like you additional options.

But it’s important to keep in mind that while inventory is improving, it’s still a sellers’ market. And that means you need to be prepared as you set out on your home search. Here are three tips for buying the home of your dreams today.

1. Understand How Mortgage Rates Impact Your Homebuying Power

Mortgage rates have increased significantly this year, and over the past few weeks, they’ve been fluctuating quite a bit. It’s important to stay up to date on what’s happening with rates and understand how they can impact your purchasing power when you’re thinking of buying a home. The chart below can help.

Let’s say your budget allows for a monthly mortgage payment in the $2,100-$2,200 range. The green in the chart indicates a payment within or below that range, while the red is a payment that exceeds it.

3 Tips for Buying a Home Today | Simplifying The Market

As the chart shows, even a small change in mortgage rates can have a big impact on your monthly payments. If rates rise, you could exceed your budget unless you pursue a lower home loan amount. If rates fall, your purchasing power may increase, which could give you additional options for your search.

2. Be Open to Exploring Different Options During Your Search

The supply of homes for sale is improving, which gives you more homes to choose from. But historically, supply is still low. That means as you search for homes, if you still don’t find something that meets your needs, it may be worth expanding your search.

A recent article from the Washington Post highlights a few things buyers can consider today. It encourages opening yourself up to more areas. For example, if there’s a location you’ve previously ruled out (like a particular town, for example) it may be worth taking another look.

And if you’re able to, opening your search up to include other housing types, like newly built homes, condominiums, or townhomes can further increase your pool of options. Even as the inventory of homes for sale improves today, finding ways to cast a wider net during your search could help you find a hidden gem.

3. Work with a Local Real Estate Professional for Expert Guidance

Ultimately, you need to be prepared when you set out to buy a home. Jeff Ostrowski, Senior Mortgage Reporter for Bankrate, explains:

“Taking the leap to homeownership can provide a feeling of pride while boosting your long-term financial outlook, if you go in well-prepared and with your eyes open.”

No matter where you’re at in your homeownership journey, the best way to make sure you’re set up for success is to work with a real estate professional. If you’re just starting your search, a real estate professional can help you understand your local market and search for available homes. And when it’s time to make an offer, they’ll be an expert advisor and negotiator to help yours stand out above the rest.

Bottom Line

Strategically planning your home search by understanding today’s mortgage rates, casting a wide net, and building a team of experts can be the keys to finding the home of your dreams. To make sure you have expert advice each step of the way, let’s connect.

Why a Home Inspection Is Important [INFOGRAPHIC]

Why a Home Inspection Is Important [INFOGRAPHIC] | Simplifying The Market

Why a Home Inspection Is Important [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • If you’re buying a home, here’s what you should know about your home inspection and why it’s so important.
  • A home inspection is a crucial step in the homebuying process. It assesses the condition of the home you plan to purchase so you can avoid costly surprises down the road.
  • Let’s connect so you have an expert on your side to guide you through the process.

Experts Increase 2022 Home Price Projections

Experts Increase 2022 Home Price Projections | Simplifying The Market

If you’re wondering if home prices are going to come down due to the cooldown in the housing market or a potential recession, here’s what you need to know. Not only are experts forecasting home prices will continue to appreciate nationwide this year, but most of them also actually increased their projections for home price appreciation from their original 2022 forecasts (shown in green in the chart below):

Experts Increase 2022 Home Price Projections | Simplifying The MarketAs the chart shows, most sources adjusted up, and now call for more appreciation in 2022 than they originally projected this January. But why are experts so confident the housing market will see ongoing appreciation? It’s because of supply and demand in most markets. As Bankrate says:

“After all, supplies of homes for sale remain near record lows. And while a jump in mortgage rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials.”

Knowing that experts forecast home prices will continue to appreciate in most markets and that they’ve actually increased their original projections for this year should help you answer the question: will home prices fall? According to the latest forecasts, experts are confident prices will continue to appreciate this year, although at a more moderate rate than they did in 2021.

Bottom Line

If you’re worried home prices are going to decline, rest assured many experts raised their forecasts to say they’ll continue to appreciate in most markets this year. If you have questions about what’s happening with home prices in our local area, let’s connect.

What Would a Recession Mean for the Housing Market?

What Would a Recession Mean for the Housing Market? | Simplifying The Market

According to a recent survey from the Wall Street Journal, the percentage of economists who believe we’ll see a recession in the next 12 months is growing. When surveyed in July 2021, only 12% of economists consulted thought there’d be a recession by now. But this July, when polled, 49% believe we will see a recession in the coming 12 months.

And as more recession talk fills the air, one concern many people have is: should I delay my homeownership plans if there’s a recession?

Here’s a look at historical data to show what happened in real estate during previous recessions to help prove why you shouldn’t be afraid of what a recession would mean for the housing market today.

A Recession Doesn’t Mean Falling Home Prices

To show that home prices don’t fall every time there’s a recession, it helps to turn to historical data. As the graph below illustrates, looking at the recessions going all the way back to 1980, home prices appreciated in four of the last six recessions. So, historically, when the economy slows down, it doesn’t mean home values will fall.

What Would a Recession Mean for the Housing Market? | Simplifying The Market

Most people remember the housing crisis in 2008 (the larger of the two red bars in the graph above) and think another recession would repeat what happened then. But this housing market isn’t about to crash. The fundamentals are very different today than they were in 2008. So, don’t assume we’re heading down the same path.

A Recession Means Falling Mortgage Rates

Research also helps paint the picture of how a recession could impact the cost of financing a home. As the chart below shows, historically, each time the economy slowed down, mortgage rates decreased.

What Would a Recession Mean for the Housing Market? | Simplifying The Market

Fortune explains that mortgage rates typically fall during an economic slowdown:

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.”

And while history doesn’t always repeat itself, we can learn from and find comfort in the historical data.

Bottom Line

There’s no doubt everyone remembers what happened in the housing market in 2008. But you don’t need to fear the word recession if you’re planning to buy or sell a home. According to historical data, in most recessions, home price gains have stayed strong, and mortgage rates have declined.

If you’re thinking about buying or selling a home, let’s connect so you have expert advice on what’s happening in the housing market and what that means for your homeownership goals.

The U.S. Homeownership Rate Is Growing

The U.S. Homeownership Rate Is Growing | Simplifying The Market

The desire to own a home is still strong today. In fact, according to the Census, the U.S. homeownership rate is on the rise. To illustrate the increase, the graph below shows the homeownership rate over the last year:

The U.S. Homeownership Rate Is Growing | Simplifying The Market

That data shows more than half of the U.S. population live in a home they own, and the percentage is growing with time.

If you’re thinking about buying a home this year, here are just a few reasons why so many people see the value of homeownership.

Why Are More People Becoming Homeowners?

There are several benefits to owning your home. A significant one, especially when inflation is high like it is today, is that homeownership can help protect you from rising costs. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:

“In the 1970s, when inflation was running around 10%, home prices were rising at approximately the same rate. Renters actually have a harder time in inflationary periods, because rents tend to rise along with inflation, whereas mortgage payments stay the same for homeowners with fixed-rate mortgages.”

When you buy a home with a fixed-rate mortgage, you can lock in what’s likely your biggest monthly expense – your housing payment – for the duration of that loan, often 15-30 years.

That gives you a predictable monthly housing expense that can benefit you in the short term, but you’ll also gain equity over time as your home appreciates in value and you make your monthly mortgage payment.

And with that growing equity, your net worth will increase as well. In fact, the latest data from NAR shows the median household net worth of a homeowner is roughly $300,000, while the median net worth of renters is only about $8,000. That means a homeowner’s net worth is nearly 40 times that of a renter.

The U.S. Homeownership Rate Is Growing | Simplifying The Market

Bottom Line

The U.S. homeownership rate is growing. If you’re ready to purchase the home of your dreams, let’s connect so you can begin the homebuying process today.

Why Experts Say the Housing Market Won’t Crash [INFOGRAPHIC]

Why Experts Say the Housing Market Won’t Crash [INFOGRAPHIC] | Simplifying The Market

Why Experts Say the Housing Market Won’t Crash [INFOGRAPHIC] | Simplifying The Market

Some Highlights

What Does the Rest of the Year Hold for Home Prices?

What Does the Rest of the Year Hold for Home Prices? | Simplifying The Market

Whether you’re a potential homebuyer, seller, or both, you probably want to know: will home prices fall this year? Let’s break down what’s happening with home prices, where experts say they’re headed, and why this matters for your homeownership goals.

Last Year’s Rapid Home Price Growth Wasn’t the Norm

In 2021, home prices appreciated quickly. One reason why is that record-low mortgage rates motivated more buyers to enter the market. As a result, there were more people looking to make a purchase than there were homes available for sale. That led to competitive bidding wars which drove prices up. CoreLogic helps explain how unusual last year’s appreciation was:

Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”

In other words, the pace of appreciation in 2021 far surpassed the 6% the market saw in 2020. And even that appreciation was greater than the pre-pandemic norm which was typically around 3.8%. This goes to show, 2021 was an anomaly in the housing market spurred by more buyers than homes for sale.

Home Price Appreciation Moderates Today

This year, home price appreciation is slowing (or decelerating) from the feverish pace the market saw over the past two years. According to the latest forecasts, experts say on average, nationwide, prices will still appreciate by roughly 10% in 2022 (see graph below):

What Does the Rest of the Year Hold for Home Prices? | Simplifying The Market

Why do all of these experts agree prices will continue to rise? It’s simple. Even though housing supply is growing today, it’s still low overall thanks to several factors, including a long period of underbuilding homes. And experts say that’s going to help keep upward pressure on home prices this year. Additionally, since mortgage rates are higher this year than they were last year, buyer demand has slowed.

As the market undergoes this change, it’s true price appreciation this year won’t match the feverish pace in 2021. But the rapid appreciation the market saw last year wasn’t sustainable anyway.

What Does That Mean for You?

Today, the market is beginning to move back toward pre-pandemic levels. But even the forecast for 10% home price growth in 2022 is well beyond the 3.8% that’s more typical for a normal market.

So, despite what you may have heard, experts say home prices won’t fall in most markets. They’ll just appreciate more moderately.

If you’re worried the house you’re trying to sell or the home you want to buy will decrease in value, you should know experts aren’t calling for depreciation in most markets, just deceleration. That means your home should still grow in value, just not as fast as it did last year.

Bottom Line

If you’re thinking of making a move, you shouldn’t wait for prices to fall. Experts say nationally, prices will continue to appreciate this year, just at a more moderate pace. When you’re ready to begin the process of buying or selling, let’s connect so you have a local market expert on your side each step of the way.

Is the Shifting Market a Challenge or an Opportunity for Homebuyers?

Is the Shifting Market a Challenge or an Opportunity for Homebuyers? | Simplifying The Market

If you tried to buy a home during the pandemic, you know the limited supply of homes for sale was a considerable challenge. It created intense bidding wars which drove home prices up as buyers competed with one another to be the winning offer.

But what was once your greatest challenge may now be your greatest opportunity. Today, data shows buyer demand is moderating in the wake of higher mortgage rates. Here are a few reasons why this shift in the housing market is good news for your homebuying plans.

The Challenge

There were many reasons for the limited number of homes on the market during the pandemic, including a history of underbuilding new homes since the market crash in 2008. As the graph below shows, housing supply is well below what the market has seen for most of the past 10 years (see graph below):

Is the Shifting Market a Challenge or an Opportunity for Homebuyers? | Simplifying The Market

The Opportunity

But that graph also shows a trend back up in the right direction this year. That’s because moderating demand is slowing the pace of home sales and that’s one of the reasons housing supply is finally able to grow. For you, that means you’ll have more options to choose from, so it shouldn’t be as difficult to find your next home as it has been recently.

And having more options may also lead to less intense bidding wars. Data from the Realtors Confidence Index from the National Association of Realtors (NAR) shows this trend has already begun. In their recent reports, bidding wars are easing month-over-month (see graph below):

Is the Shifting Market a Challenge or an Opportunity for Homebuyers? | Simplifying The Market

If you’ve been outbid before or you’ve struggled to find a home that meets your needs, breathe a welcome sigh of relief. The big takeaway here is you have more options and less competition today.

Just remember, while easing, data shows multiple-offer scenarios are still happening – they’re just not as intense as they were over the past year. You should still lean on an agent to guide you through the process and help you make your strongest offer up front.

Bottom Line

If you’re still looking to make a move, it may be time to pick your home search back up today. Let’s connect to kick off the homebuying process.

Housing Market Forecast for the Rest of 2022 [INFOGRAPHIC]

Housing Market Forecast for the Rest of 2022 [INFOGRAPHIC] | Simplifying The Market

Housing Market Forecast for the Rest of 2022 [INFOGRAPHIC] | Simplifying The Market

Some Highlights