What’s happening right now?
Currently, we are seeing mortgage rates dropping a bit, but it is expected to begin rising and projections point toward the rate nearing 3.8% by the fourth quarter of 2022. We are also seeing the average of all home price forecasts appreciating at 6.8%. In this blog we will be talking about forbearance, lack of inventory, the return of inventory, the top reasons homeowners are considering selling, and the home sales forecast.
As you can see on the graph below home prices are averaging at 6.8%.
The programs that were designed for people in forbearance have done their job. Many feared that those in forbearance would lose their homes at an alarming rate, but thankfully that has not been the case. Instead, we are seeing people come out of forbearance current on their mortgage and or on plans that are keeping them on track to paying their home. These programs have performed extremely well and the data supports that. If you look over to the right you can see the data that supports this.
Let’s talk about what everyone is really talking about, lack of inventory. Agents and clients are extremely frustrated because there just aren’t enough homes on the market. Once a home goes on the market it can be gone within hours and that can be discouraging. So this all begs the question, why is this happening? Opinions aside, let’s look at the data. The data points to the decline of the construction of single family homes as the driving factor of this housing shortfall. As you can see on the graph, only 5.8 million homes have been built in the last ten years compared to previous years such as the period between 2000 – 2009 where 27.1 million homes were built. The fact is, new construction is not keeping up with the growing population. As Lawrence Yun said, “Is not a bubble. It is simply lack of supply.”
So what’s next? Will inventory ever return? Yes, inventory will return. This can be a challenging time, but the tide will turn. If you take a look at the graph to the right you will see that a survey of economists project that inventory will grow by 43% in the 2nd half of 2021. In the mean time, be sure you are staying current with your market and database and help your clients win these deals. Be the knowledge broker and educate others instead of spreading fear based off opinions.
The Top 5 Reasons Homeowners Plan To Sell This Year
- Our home no longer meets our needs
- We can make a profit in the current market
- We want a smaller house/less work
- We want to live closer to friends and family
- We want different features and amenities
So let’s dissect this a bit. We have homeowners out there who after a year of madness due to the pandemic have reflected on their home. Homeowners realize what they truly need in a home has shifted. Also, we have homeowners who have built a large amount of equity in their home and they are seeing that it is definitely a seller’s market and they are thinking that now might be the right time to sell. Next, we have the homeowners who may have had big changes and need to downsize into a home that is more comfortable for them to maintain. The fourth reason has been a reason that has generated a ton of buzz over the last year, the desire to live closer to friends and family. This reason right here been emphasized throughout the pandemic when families in the same household felt a need for closeness with loved ones in a different household during a time where distance was encouraged for safety. Lastly, the want for different features and amenities is on homeowner’s minds. After all, spending so much time at home for the last year can definitely make one think what would make their home more fun, functional and over all desirable.
What should we do with this information? Seek the homeowners who have had shifted needs and desires and help them into a home that truly fits their needs. Talk with clients and gain a deep understanding for what they’re needing and prepare them for what to expect in today’s market. Then, guide them and remain their knowledge broker so that they don’t let the scary real estate headlines deter them.
Home Sales Forecast
If you take a look at the graph to the left you will see that it is projected that more homes will be sold in 2021 than in 2020. If we compare those numbers than we see that between 6.9 million and 7.3 million homes are projected to be sold this year compared to 6.5 million homes sold in 2020.
To conclude we expect to see a lot of changes this year. We will see mortgage rates begin to increase again but still remain favorable. We will see home prices continue to appreciate but the rate will depend on how quickly new inventory makes its way to the market. We hope to see forbearance programs continue to do what they were designed to do and help people stay in their homes. We also look to see more new construction, as we are very behind on new single-family home development. We do expect to see more inventory come to market, especially in the second half of this year. You may however see inflated new listings right now, but that is because new listings right now are being compared to the new listings that took place this time last year right after the pandemic hit the U.S. hard.
As always we are your friends in real estate, here for all your real estate needs.
The Freund Group with Compass Real Estate.