Archive for February 2023

One of the many reasons to buy a home is that it’s a major way to build wealth and gain financial stability. According to Freddie Mac:

“Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”

With spring approaching, now’s a great time to consider if buying a home makes sense for you. The best way to figure that out is to talk with a trusted real estate professional.

The Largest Part of Most Homeowners’ Net Worth Is Their Equity

You may be surprised to learn just how much of a homeowner’s net worth actually comes from owning their home. The National Association of Realtors (NAR) shares:

“Homeownership is the largest source of wealth among families, with the median value of a primary residence worth about ten times the median value of financial assets held by families. Housing wealth (home equity or net worth) gains are built up through price appreciation and by paying off the mortgage.”

In other words, home equity does more to build the average household’s wealth than anything else. And according to data from First American, this holds true across different income levels (see graph below):

Bottom Line

One of the biggest benefits of owning a home, regardless of your income level, is that it provides financial stability and an avenue to build wealth. Let’s connect today so you can start investing in homeownership.

Source: https://www.simplifyingthemarket.com/en/2023/02/27/one-major-benefit-of-investing-in-a-home/?a=5256-fd674d1a840c47baa4da566e9ff662ab

The recent changes in home prices are top of mind for many as the housing market begins gearing up for spring. It can be hard to navigate misleading headlines and confusing data, so here’s what you should know about today’s home prices.

Local price trends still vary by market. But looking at national data, Nataliya Polkovnichenko, Ph.D., Supervisory Economist at the Federal Housing Finance Agency (FHFA), explains:

“U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022. While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.”

Month-over-month home price changes can be seen in the chart below. The data also shows that price depreciation peaked around August. Since then, any depreciation has been even milder. In other words, today’s home prices aren’t in a freefall.

What Does This Mean for You?

If you currently own your house, you may be concerned about even the smallest decline in prices. But keep in mind how much home values grew over the last few years. Compared to that growth, any declines we’re seeing nationally are likely to be minimal. Selma Hepp, Chief Economist at CoreLogic, shares:

“. . . while prices continued to fall from November, the rate of decline was lower than that seen in the summer and still adds up to only a 3% cumulative drop in prices since last spring’s peak.”

It’s also important to remember that every local market is different. That’s why it’s essential to lean on an expert for the latest information on the home prices in your area if you’re planning to make a move this spring.

Bottom Line

To understand what’s going on with home prices in our market and how they could impact your goals, let’s connect today.

Source: https://www.simplifyingthemarket.com/en/2023/02/16/wondering-whats-going-on-with-home-prices/?a=5256-fd674d1a840c47baa4da566e9ff662ab

Back Then, Mortgage Standards Were Less Strict

During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance an existing one.

As a result, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from mortgage companies.

The graph below uses data from the Mortgage Bankers Association (MBA) to help tell this story. In this index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is.

This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards have helped prevent a situation that could lead to a wave of foreclosures like the last time.

Foreclosure Volume Has Declined a Lot Since the Crash

Another difference is the number of homeowners that were facing foreclosure when the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM to show the difference between last time and now:

So even as foreclosures tick up, the total number is still very low. And on top of that, most experts don’t expect foreclosures to go up drastically like they did following the crash in 2008. Bill McBride, Founder of Calculated Risk, explains the impact a large increase in foreclosures had on home prices back then – and how that’s unlikely this time.

“The bottom line is there will be an increase in foreclosures over the next year (from record level lows), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”

The Supply of Homes for Sale Today Is More Limited

For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to years of underbuilding homes.

The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just 2.7-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines.

Bottom Line

If recent headlines have you worried we’re headed for another housing crash, the data above should help ease those fears. Expert insights and the most current data clearly show that today’s market is nothing like it was last time.

Source: https://www.simplifyingthemarket.com/en/2023/02/09/why-todays-housing-market-isnt-headed-for-a-crash/?a=5256-fd674d1a840c47baa4da566e9ff662ab