I’m back with your hot-off-the-press August market update. This month, I’ve got some great news to share with you.
For the first time in three years, the year-over-year inventory numbers are positive. That means there have been more listings this past month than there were at the same time last year. Check out the graph at 0:29 in the video above for a visual representation of what I mean.
Our currently inventory levels are far from what’s needed to satisfy demand. Though more interested buyers are coming into the market and the new home construction is failing to keep up, the number of buyers has fallen over the last couple of months. Inventory has followed suit, which can be seen on the chart at 1:05 in the video.
The decreasing supply of homes is leading to an increase in sales prices and decrease of days on the market. But again, we simply don’t have enough to meet demands in the first-time buyer and move-up markets.
According to data from CoreLogic, the inventory for the starter home market is down 14.5% year over year, but prices are up 9.4%. Even though national inventory is up, the starter home market supply is dramatically down. That will likely continue to be the case because young people are driving this market.
Interestingly enough, the chances of millennials buying homes increases by 17.9% once they’re married and an additional 6.2% once they have children. As millennials get older, they’ll jump into homeownership more, but there are a lot of obstacles that some will need to overcome.
First American did a survey and found that 35% of millennials said that there was limited inventory of homes that they liked. Other obstacles found by the survey included overall affordability, inability to afford the down payment, and access to credit.
The year-over-year comparisons have so far been pretty bleak, however, a recent uptick may mean the inventory challenge that first-time homebuyers face may become less acute.
Since 1991, buying power has increased over time. Median home prices rose alongside this trend until about 2005, when they dropped. Now, however, prices are back on the rise. Overall, homes are still very affordable.
Between 1985 and 2000, 21% of one’s income was dedicated to a mortgage payment on average. In 2006, that number jumped to 25.4%. Right now, that number is at 17.1%. According to Zillow, even if interest rates do go up to 5%, a mortgage payment will only account for 19% of one’s income. At a 6% rate, the percentage will increase slightly to 21.2%. So it will only be between a 5% and 6% rate that people will find that homes are truly less affordable.
As far as down payments are concerned, there is a huge misconception in the market: Studies have shown that people believe they need to put 20% down on a home, and that’s simply not true. According to Down Payment Resource, millennials put down about 11%, buyers with FHA loans put down just 4%, conventional loan buyers put down 19%, and people with VA loans put down an average of 2% (even though that program often requires 0% down). So we can see that there are lots of opportunities in which buyers aren’t pressed to put 20% down on a home and start building equity.
I don’t want to bring you this update without letting you know that we’re in for an economic slowdown in the future. Data from The Wall Street Journal’s survey of economists, investment strategists, and real estate market analysts shows us that at the end of 2019 through 2020 and possibly into 2021, the market will experience a slowdown.
What does that mean for you?
For sellers, it means you should consider putting your home on the market very soon. It’s never too early to get started, so don’t wait for the slowdown to begin, since it might then be too late to get the best price for your home.
If you’re thinking of putting your home on the market in the next three months or even three years, I invite you to join me at our next free Home Seller Seminar on Saturday, October 13, at the Fort Washington Hilton Garden Inn. There, I’ll give you great strategic information on how to keep more money in your pocket while still selling your home fast. Go to www.homesharkseminar.com to sign up.
For any other questions, you’re always encouraged to reach out to me.