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Every three years, the Federal Reserve conducts its Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.
The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).
These numbers reveal that the net worth of a homeowner is over Continue reading…
It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.
Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by 3.5% over the last year.
Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.
Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:
We can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts. However, homes are more affordable today than at any time from 1990 to 2008.
NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%.
This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:
“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment…Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”
While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:
“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.”
Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:
“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”
If you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised!
Over the last couple of years, we’ve heard quite a bit about rising home prices. Today, expert projections still forecast continued growth, just at a slower pace. One of the often-overlooked benefits of rising home prices is the positive impact they have on home equity. Let’s break down three ways this is a win for homeowners.
With the rise in prices, homeowners naturally experience an increase in home equity. According to the Homeowner Equity Insights from CoreLogic,
“In the first quarter of 2019, the average homeowner gained approximately $6,400 in equity during the past year.”
This increase in profit means if homeowners decide to sell, they’ll be able to put their equity to work for them as they make plans to move up into their next home.
ATTOM Data Solutions recently released their Q2 2019 Home Sales Report, indicating the seller’s profit jumped at one of the fastest rates since 2015. They said:
“A look at the national numbers showed that U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since the original purchase of $67,500…the average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of the original purchase price.”
Looking at the amount paid when they bought their homes, and then the amount they received after selling, we can see that some homeowners were able to walk away with a significant gain.
Negative equity occurs when there is a decline in home value, an increase in mortgage debt, or both. Many families experienced these challenges over the last decade. According to the same report from CoreLogic,
“U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of nearly $485.7 billion since the first quarter 2018, an increase of 5.6%, year over year.
In the first quarter of 2019, the total number of mortgaged residential properties with negative equity decreased…to 2.2 million homes, or 4.1% of all mortgaged properties.”
The good news is, many families have moved beyond a negative equity situation, and no longer owe more on their mortgage than the value of their home.
If you’re a current homeowner, you may have more equity than you realize. Your equity can open the door to future opportunities, such as moving up to your dream home. Let’s get together to discuss your options and start to put your equity to work for you.
Fannie Mae just released the July edition of their Home Purchase Sentiment Index (HPSI). The HPSI takes information regarding consumers’ confidence in the real estate market from Fannie Mae’s National Housing Survey and condenses it into a single number. Therefore, the HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions.
Great News! The index reached its highest level since Fannie Mae began their survey. Breaking it down, the report revealed:
The day after the index was released, Freddie Mac also announced the 30-year fixed-rate mortgage rate fell to its lowest level in three years.
Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae explained the uptick in the index:
“Consumer job confidence and favorable mortgage rate expectations lifted the HPSI to a new survey high in July, despite ongoing housing supply and affordability challenges. Consumers appear to have shaken off a winter slump in sentiment amid strong income gains. Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category.”
Consumers are feeling good about the real estate market. Since Americans are not worried about their jobs, see mortgage rates near an all-time low, and believe it is a good time to buy, the housing market will remain strong for the rest of the year.
The U.S. Census Bureau recently released their 2019 Q2 Homeownership Report. Some began to see the sky falling, believing the report showed Americans may be stepping back from their belief in homeownership.
The national homeownership rate (Americans who owned vs. rented their primary residence) increased significantly during the housing boom, reaching its peak of 69.2% in 2004. The Census Bureau reported that the second quarter of 2019 ended with a homeownership rate of 64.1%, which is down from the 64.8% rate for the fourth quarter of 2018. Based on this news, some started to question the consumer’s belief in the idea of homeownership as a major part of the American Dream.
It is true the homeownership rate did fall. However, if you look at the national rate over the last 35 years (1984-2019), you can see that the current homeownership rate has returned to historical norms. The 64.1% rate is equivalent to the rates in 1984 and 1994.
Part of the reason the homeownership rate slipped is a lack of inventory available for purchase for first-time home buyers. The demand is there, but currently, the supply is not. It seems, however, that is about to change.
In a recent report, Ivy Zelman explained that builders have finally started to increase the number of homes they’re constructing at the lower-end price points:
“Robust growth in the entry-level price point of late should translate to a reacceleration in homeownership rates moving forward.”
Today, the homeownership rate sits at historic norms. In all probability, it will increase as more inventory becomes available. There is no reason for concern.
There’s no doubt that today’s housing market is changing, and everything we see right now indicates it is time to sell. Here’s a look at why selling now is likely to drive the greatest return on your largest investment.
Home values have been appreciating for several years now, growing at a strong, steady, and impressive pace. In fact, the average annual appreciation rate since 2012 has nearly doubled the average rate from the more normal market of the 1990s (think: pre-bubble).
Appreciation, however, is projected to shift back toward normal, meaning home prices will likely keep climbing over the next few years, but they are not projected to continue to increase at such a high rate.
As noted in the latest Home Price Expectation Survey (HPES) powered by Pulsenomics, experts forecast an average annual appreciation rate closer to 3.2% over the next five years, which is more in line with a historically normal market (3.6%). The good news is, there’s still time to take advantage of the current strength of home prices by selling your house now.
Looking at the projections as they stand today, 2019 is slated to drive the strongest appreciation as compared to the upcoming few years. With average home prices still on the rise, the pace at which they are predicted to continue increasing will likely soften by 2020.
If you’re thinking about selling your house, now is a great time to make your move. Don’t get stuck waiting until projected home price appreciation rates potentially re-accelerate again in 2023. You’ll likely earn the greatest return on your investment by selling now before the prices start to normalize next year.
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![Existing Home Sales Point Toward a Good Time to Sell [INFOGRAPHIC] | Simplifying The Market](https://daytonabeachpropertysearch.com/wp-content/uploads/2019/08/20190801-MEM.jpg)
We’ve experienced economic growth for almost a decade, which is the longest recovery in the nation’s history. Experts know a recession can’t be too far off, but when will this economic slowdown actually occur?
Pulsenomics just released a special report revealing that nearly 6 out of 10 of the 90 economists, investment strategists, and market analysts surveyed believe the next recession will occur by the end of next year. Here’s the breakdown:
When asked what would trigger the next recession, the three most common responses by those surveyed were:
Challenges in the housing and mortgage markets were major triggers of the last recession. However, a housing slowdown ranked #9 on the list of potential triggers for the next recession, behind such possibilities as fiscal policy and political gridlock.
As far as the impact the recession may have on home values, the experts surveyed indicated home prices would continue to appreciate over the next few years. They called for a 4.1% appreciation rate this year, 2.8% in 2020, and 2.5% in 2021.
On the same day, in the same survey, the same experts who forecasted a recession happening within the next 18 months also claimed housing will not be the trigger, and home values will still continue to appreciate.
As a homeowner, it’s always tempting to dream about the next big project you’re going to tackle. The possibilities are endless. Should I renovate? Should I refinance? Should I stay? Should I move? The list goes on and on.
In today’s housing market, it’s actually a great time to shift your thoughts toward selling your house and moving up into the home of your dreams. Here’s why:
Inventory is on the rise, but there’s still an overall shortage of houses for sale (less than a 6-month supply found in a more normal market), so homes are going under contract quickly. In fact, the National Association of Realtors (NAR) Realtors® Confidence Index Survey reports that right now homes are only staying on the market for an average of 27 days. That’s less than one month, an even more accelerated pace from the 36-day trend we saw last spring.
The same report also indicates there are more interested buyers than active sellers today, which is one of the big factors driving home prices higher.
This power combination provides an ideal environment for sellers aiming to close a quick sale and earn a big return as we wrap up the summer season.
There’s still time to make a move before the school year starts and the fall weather sets in. Maybe it’s time to make a change. Let’s get together to determine if selling now is the right decision for your family.
Many of the questions currently surrounding the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers.
Here are the results from the Q2 2019 Survey:
A substantial portion of family wealth comes from home equity. As the value of a family’s home (an asset) increases, so does their equity.
Using the projections from the HPES, here is a look at the potential equity a family could earn over the next five years if they purchased a $250,000 home in January of 2019:
Based on gains in home equity, their family wealth could increase by $42,000 over that five-year period.
If you don’t yet own a home, now may be the time to purchase. Owning or moving up to your dream home could allow you to ride the increase in equity of a growing asset.