Home Prices: It’s All About Supply and Demand

As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of what’s to come.

Making our way through the month of June and entering the second half of the year, we face an undersupply of homes on the market. Keep in mind, this undersupply is going to vary by location and by price point. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Home Prices: It’s All About Supply and Demand | Keeping Current MattersRobert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

Given the undersupply of homes on the market today, there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process. According to a recent MarketWatch article:

 “As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.”

In addition, experts forecasting home prices have updated their projections given the impact of the pandemic. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.Home Prices: It’s All About Supply and Demand | Keeping Current Matters

Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale. Call me today at 714.343.9294.

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Is it Time to Sell Your Vacation Home?

A recent CNN article indicated:

“With global travel screeching to a halt during the pandemic, a number of Airbnb hosts are planning to sell their properties…These desperate moves come as hosts face the possibility of losing thousands of dollars a month in canceled bookings while bills, maintenance costs, and mortgage payments pile up.”

If you’re one of the property owners in this position, you too may be feeling the pain of decreased travel, especially as we prepare for the typical busy summer vacation season. A recent survey notes that 48% of Americans have already canceled summer travel plans due to the current health crisis. In addition, 36% indicated they don’t have vacation plans, and only 16% said they did not cancel their summer travel.

The same survey also asked, “How long will you wait before traveling again?” Not surprisingly, only 29% of respondents are planning to travel within the next 6 months. That means 71% are putting their plans on hold for at least 6 months, or are still unsure about future travel. That can continue to add to the significant income loss that many property renters felt this spring.Is it Time to Sell Your Vacation Home? | Keeping Current MattersIf you’re considering selling your rental property, know that there are two key factors indicating that selling your vacation home now may be your best move as a homeowner.

1. Inventory Shortage

The inventory of overall homes for sale is well below the demand from potential buyers, so many eyes may be searching for a home like yours. According to the National Association of Realtors (NAR), total housing inventory, meaning homes available to purchase, is down 19.7% from one year ago (see graph below):Is it Time to Sell Your Vacation Home? | Keeping Current MattersInventory across the country continues to be a challenge, with only a 4.1-month supply of listings available at the current sales pace. For a balanced market, where there are enough homes available for interested buyers to purchase, that number would need to bump up to a 6-month supply. This means we don’t have enough inventory for the number of buyers looking for homes, so selling in this scenario is ideal. Buyers are looking now, and some vacation homes make a great primary residence or second home for those eager to escape from more populated urban areas.

2. Home Prices

The lack of inventory is also keeping homes from depreciating in value. Today, prices are holding strong and experts forecast home price appreciation to continue throughout this year. Selling your home while prices are holding steady is a sound business move. You’ll likely have equity you’ve earned working for you as well. If your home has been vacant for the past few months, the forced savings you have built in your equity may help balance out possible rental income loss due to the slowdown in the travel industry.

We don’t know exactly when heightened summer travel will return or what it will look like when it does. If you’re considering selling your vacation home, contact a local real estate professional to determine your options in the current market. The Stovall Team will simply & effectively explain our complex housing market.

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2020 Summer Heating Up Real Estate

With stay-at-home orders starting to gradually lift throughout parts of the country, data indicates homebuyers are jumping back into the market. After many families put their plans on hold due to the COVID-19 pandemic, what we once called the busy spring real estate season is shifting into the summer. In 2020, summer is the new spring for real estate.

  • Google reports searches for “homes for sale” are up an average of 54% from 2020 lows in 50 metro areas.
  • Freddie Mac’s chief economist said, “Today’s purchase demand is only down 10% from a year ago.”
  • Zillow reports new listings nationally grew 5.9%, up for the third week in a row.
  • Applications for mortgages to purchase homes went up 6% for the week and only 1.5% below a year ago.

These are all positive trends.

Orange County market stats:
  • Last 12 months in Orange County-Seven Gable Real Estate leads the top 10 companies in the fewest “Days On Market” of any company.
  • Offices YTD (closings-not pended):  850+ sides, UP 3.3% over 2019
  • Month Over Month:  comparing April 1-25 to May -25-All of Orange County-New listings UP 34%, Pended sales UP 60.4%
  • Month Over Month-same period, over 1 million in OC-New listings UP 58.4%, Pended sales UP 94.6%
  • Month Over Month-same period, over 2 million in OC-New listings UP 71.7%, Pended sales UP 48.2%

What’s the Opportunity for Buyers?  Another reason buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is historically low mortgage rates. Sam Khater, Chief Economist at Freddie Mac indicates:   “For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, giving potential buyers a good reason to continue shopping even amid the pandemic…As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago.”  With mortgage rates at such low levels and states gradually beginning to reopen, there’s more incentive than ever to buy a home this summer.

What’s the Opportunity for Sellers? Finding a home to buy, however, is still a challenge, as this spring sellers removed many listings from the market. Though more people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level.  According to last week’s Weekly Economic and Housing Market Update from realtor.com“Weekly Housing Inventory showed continued tightening. New Listings declined 28% compared with a year ago, as sellers grappled with uncertainty and hesitated bringing homes to market. Total Listings dropped 20% YoY, a faster rate than in prior weeks, leaving very few homes available for sale. As Time on Market was 15 days slower YoY, asking prices moved up 1.5% YoY.”

If you’re thinking of selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this season may be the time for your house to stand out from the crowd. Stovall Team will help you list safely and effectively, keeping your family’s needs top of mind. Buyers are looking, and your house may be at the top of their list. If you’re thinking of selling, many buyers may be eager to find a home just like yours. Reach out to Stovall Team today to make sure you can get your house in on the action this summer. Call me today at 714.343.9294. 

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#1 Financial Benefit of Homeownership: Family Wealth

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May 25 | Memorial Day 2020 | South Cobb, GA Patch

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