Choosing the right real estate professional is one of the most impactful decisions you can make in your home buying or selling process. The Stovall Team will explain current market conditions and break down what they will mean to you and your family.
If you’re considering buying or selling a home in 2020, make sure to work with someone who has the experience to answer all of your questions about pricing, contracts, and negotiations. Call Micah Stovall today at 714.343.9294.
Life is tough. It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,
“Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”
Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.
Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,
“Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”
Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,
“The death toll from the coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”
The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:
How might concerns about global challenges impact the housing market in 2020? Fleming explains,
“Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”
For a multitude of reasons, 2020 could be a challenging year. It seems, however, locally real estate will continue to be one of the safest investments in the world.
If you’re following what’s happening in the current housing market, you’ve seen how the lack of newly constructed homes is a major reason there’s a shortage of housing inventory available to today’s buyers. Another reason is that the inventory of existing homes for sale is shrinking. According to the most recent Existing Home Sales Report from the National Association of Realtors (NAR), sales are up 10.8% from the same time last year. That exceeds expectations and is great news.
The troubling news from the report is that the sold inventory is not being replaced. As NAR explained,
“Total housing inventory at the end of December totaled 1.40 million units, down 14.6% from November and 8.5% from one year ago. Unsold inventory sits at a 3.0-month supply at the current sales pace, down from the 3.7-month figure recorded in both November and December 2018. Unsold inventory totals have dropped for seven consecutive months from year-ago levels, taking a toll on home sales.”
The situation was also addressed in a recent Zillow article stating,
“The number of for-sale homes in the U.S. is at its lowest point in at least seven years, and the shortage appears poised to get worse before it gets better.”
Bill McBride of Calculated Risk further noted,
“Inventory always decreases sharply in December as people take their homes off the market for the holidays. However, based on the data I’ve collected, this was the lowest level for inventory in at least three decades (the previous low was 1.43 million in December 1993).”
A year ago, that was the case – but the market shifted again. Skylar Olsen, Director of Economic Research at Zillow, explains,
“A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back to accelerating growth right as we head into home shopping season with demand outpacing supply.”
Now is a great time to consider putting your home on the market. The competition (number of houses on the market) has not been this low in decades. It’s best not to wait for the inventory (both existing homes and new construction) to increase in the spring, as it always does.The supply of homes for sale is at a historic low. Buyer demand is surprisingly strong. Now would be a great time to sell.
Entry-Level Homeowners Are in the Driver’s Seat
One thing helping homeowners right now is price appreciation, especially in the entry-level market. In the latest Home Price Insights report, CoreLogic reveals how home prices increased by 4% year-over-year and projects prices will rise 5.2% by December 2020. Today there are fewer than 70 single-family homes on the market for under $1M in Huntington Beach, Fountain Valley, Costa Mesa and Westminster COMBINED. If you’re considering moving out of an entry-level house, you are going to be in the driver’s seat as a seller.
Our commitment to seamless service means the only thing you have to do is contact us. We’ll do the rest. Call me today at 714.343.9294
Why is this good news for the homeowners? When prices appreciate, homeowners gain equity. In addition, those planning to sell this year, especially in the entry-level market, can potentially earn a substantial profit. Dr. Frank Nothaft, Chief Economist at CoreLogic, says: “Moderately priced homes are in high demand and short supply, pushing up values…Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median.”
As Dr. Nothaft indicates, the lack of inventory continues to drive home price growth. This means there’s a high demand for homes in this tier of the market, making it a great time to consider using your equity to move up to a bigger or more premium home.
When you upgrade your home, you may be able to find the amenities or features you’ve dreamed of – such as a yard to plant or garden in with your family this spring, or more outdoor space for entertaining this summer. Maybe it’s the master bath you’ve always hoped for, or a garage to finally park your car inside.
If you’re moving out of an entry-level house and working with Micah Stovall, you’re going to be in the driver’s seat as a seller.
If you’d like to own a bigger home, sit down with Stovall Team today to discuss your situation. You may be surprised by the current value of your home and the equity you’ve gained. Call me at 714.343.9294.