What’s Causing Today’s Competitive Real Estate Market? [INFOGRAPHIC]

Some HighlightsToday’s strong sellers’ market is the direct result of high demand and low supply.Low mortgage rates and generational trends have created an increased demand for homes. Meanwhile, the slower pace of new home construction and homeowners staying in their homes longer have both led to today’s low supply.If you’re thinking of selling, let’s connect to talk about our local area and how you can take advantage of today’s housing market.Content previously posted on Keeping Current Matters

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111,285 Reasons You Should Buy a Home This Year

The financial benefits of buying a home versus renting one are always up for debate. However, one element of the equation is often ignored – the ability to build wealth as a homeowner.According to the latest research from the National Association of Realtors (NAR):“Homeownership is a key pathway to building wealth and narrowing the racial income and wealth inequality gap. Housing wealth (equity) accumulation takes time and is built up by price appreciation and paying off the mortgage.”An increase in equity builds the wealth of the individual that owns it. This wealth can be passed down to future generations. The Federal Reserve in an addendum to their Survey of Consumer Finances explains:“There are numerous ways families can transmit wealth and resources across generations. Families can directly transfer their wealth to the next generation in the form of a bequest. They can also provide the next generation with inter vivos transfers (gifts), for example, providing down payment support to enable a home purchase or a substantial wedding gift.”The Federal Reserve also explains another way wealth (including the additional net worth generated by an increase in home equity) can benefit future generations:“In addition to direct transfers or gifts, families can make investments in their children that indirectly increase their wealth. For example, families can invest in their children’s educational success by paying for college or private schools, which can in turn increase their children’s ability to accumulate wealth.”Here’s a look at how equity can build your wealth over time when you own a home.Equity over the Last 30 YearsThe NAR research reveals that the average gain for homeowners over the last five years was $139,134 and over the last 10 years was $218,505. Looking even further back in time, the article says:“Homeowners who purchased a typical single-family existing-home 30 years ago at the median sales price of $103,333 with a 10% down payment loan and who sold the property at the median sales price of $357,700 in 2021 Q2 accumulated housing wealth of $349,258.”Homeownership builds household wealth which also enables households to more easily move to the home of their dreams. As Mark Fleming, the Chief Economist at First American, explains:“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity.”If you missed out on the equity gains over the last 30 years, don’t fret. Experts are still calling for substantial growth in equity over the next five years.Looking Forward at the Equity To ComeThe most recent Home Price Expectation Survey, a survey of over one hundred economists, real estate experts, and investment and market strategists, expects home values (and therefore equity) to increase as follows:2021: 11.74%2022: 5.82%2023: 3.94%2024: 3.56%2025: 3.55%The survey estimates a 31.8% cumulative appreciation over the next five years. Using their annual projections, the graph below shows the equity build-up a purchaser could earn, using a $350,000 home as an example:That’s a potential increase in household wealth of $111,285 over five years.Bottom LineOwning a home is one of the best ways to grow your wealth over time. House wealth can impact generations. In many cases, the largest single investment a household has is their home. As that investment appreciates in value, the financial options also increase.Content previously posted on Keeping Current Matters

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What Do Supply and Demand Tell Us About Today’s Housing Market?

There’s a well-known economic theory – the law of supply and demand – that explains what’s happening with prices in the current real estate market. Put simply, when demand for an item is high, prices rise. When the supply of the item increases, prices fall. Of course, when demand is very high and supply is very low, prices can rise significantly.Understanding the impact both supply and demand have can provide the answers to a few popular questions about today’s housing market:Why are prices rising?Where are prices headed?What does this mean for homebuyers?Why Are Prices Rising? According to the latest Home Price Insights report from CoreLogic, home prices have risen 18.1% since this time last year. But what’s driving the increase?Recent buyer and seller activity data from the National Association of Realtors (NAR) helps answer that question. When we take NAR’s buyer activity data and compare it to the seller traffic during the same timeframe, we can see buyer demand continues to outpace seller activity by a wide margin. In other words, the demand for homes is significantly greater than the current supply that’s available to buy (see maps below):This combination of low supply and high demand is what’s driving home prices up. Bill McBride, author of the Calculated Risk blog, puts it best, saying:“By some measures, house prices seem high, but the recent price increases make sense from a supply and demand perspective.”Where Are Prices Headed?The supply of homes for sale will greatly affect where prices head over the coming months. Many experts forecast prices will continue to increase, but they’ll likely appreciate at a slower rate.Buyers hoping to purchase the home of their dreams may see this as welcome news. In this case, perspective is important: a slight moderation of home prices does not mean prices will depreciate or fall. Price increases may occur at a slower pace, but experts still expect them to rise.Five major entities that closely follow the real estate market forecast home prices will continue appreciating through 2022 (see graph below):What Does This Mean for Homebuyers? If you’re waiting to enter the market because you’re expecting prices to drop, you may end up paying more in the long run. Even if price increases occur at a slower rate next year, prices are still projected to rise. That means the home of your dreams will likely cost even more in 2022.Bottom LineThe truth is, high demand and low supply are what’s driving up home prices in today’s housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise. If you’re a potential homebuyer, let’s connect today to discuss what that could mean for you if you wait even longer to buy.Content previously posted on Keeping Current Matters

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