‘January is the new April’

The severe shortage of homes for sale is upending the sales calendar for the whole housing market. Spring has historically been the busiest buying season, but as competition for homes heats up across the country, January is the new April. Spring starts now.

The numbers are telling. From 2015 through 2018, the peak month for average views per listing on Realtor.com was April. January lagged by a full 16%. In 2019, however, January was the busiest month on the site in 20 of the largest 100 metropolitan markets.

Those markets included New York City, Los Angeles, Chicago, Dallas, Houston, Seattle, San Francisco, Atlanta, Denver and San Jose, California. In 2018, January was the busiest month in just three of the largest 100 markets. This year, the expectation is that January will be the strongest month in even more markets.

“As shoppers modify their strategies for navigating a housing market that has become more competitive due to rising prices and low inventory, the search for a home is beginning earlier and earlier,” said George Ratiu, senior economist at realtor.com. “With housing inventory across the U.S. expected to reach record lows in 2020, we expect to see this trend continue into the new year.”

https://www.cnbc.com/2020/01/02/competition-for-housing-is-so-high-the-spring-market-is-starting-now.html

2019 Wrap-Up & 2020 Forecast

Last December, I had guessed NSDCC sales would drop by 20% this year, but that was back when mortgage rates were touching 5%.  With rates back in the 3s for most of 2019, our sales exceeded my expectations – here are the NSDCC detached-home listings and sales for the first 11 months:

NSDCC Detached-Home Sales, Jan-Nov

Year
Total # of Listings, Jan – Nov
# of Sales, Jan – Nov
Median Sales Price
2016
4,984
2,868
$1,165,000
2017
4,500
2,873
$1,225,000
2018
4,689
2,615
$1,325,000
2019
4,573
2,587
$1,325,000

We’re only 28 sales behind last year, and the late-reporters should pull us up real close to 2018.

This year’s sales AND pricing statistics are virtually identical to last year!

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There should be more forecasts coming in the next week, but let’s consider what we have so far.

This in today from realtor.com – they have sales dropping in 2020, and prices flat:

Home sales will drop, the housing shortage could become the worst in U.S. history, and home values will shrink in some cities. That’s the 2020 forecast from realtor.com, which holds one of the largest databases of housing statistics available.

Sales of existing homes will fall 1.8% from 2019, according to the forecast. Home prices will flatten nationally, increasing just 0.8% annually, but prices will fall in a quarter of the 100 largest metropolitan markets, including Chicago, Dallas, Las Vegas, Miami, St. Louis, Detroit and San Francisco.

It is a seemingly contrary assessment, given the current strength of the economy and of homebuyer demand, but the dynamics of this housing market are unlike any other — the result of a housing crash unlike any other.

“Real estate fundamentals remain entangled in a lattice of continuing demand, tight supply and disciplined financial underwriting,” said George Ratiu, senior economist at realtor.com. “Accordingly, 2020 will prove to be the most challenging year for buyers, not because of what they can afford but rather what they can’t find.”

They also predict that the San Diego-Carlsbad metro sales will drop by 3.2%, and prices rise +0.2%.

Link to Realtor.com Forecast

Here are other similar forecasts:

California Association of Realtors NSDCAR (our local realtor assoc.) Forbes

From the enthusiastic Forbes article:

“Low interest rates and a shortage of starter homes will continue to push up prices,” DeFranco said. “This is especially the case for lower price points, since builders have tended to focus on more expensive, higher-profit houses and less on replenishing low inventories of entry-level homes.”

It seems the price growth may continue beyond 2020, too. Data from Arch MI shows the chance of home price declines at a mere 11% for the next two years. There are currently no states or metro markets projected to see prices declines in that period.

Have & Havenots

Nearly 80% of those homeowners with a mortgage are spending less than 35% of their income on housing costs?  That sounds like a solid, secure market. Renters should talk to their parents or grandparents about early distribution of their estate:

American homeowners aren’t feeling the pinch from housing costs like they used to — but that’s not necessarily reason to celebrate.

Only 20.9% of homeowners with a mortgage were cost-burdened as of 2018, meaning that they spent at least 35% of their monthly household income on housing costs, according to new data from the U.S. Census Bureau’s American Community Survey. That’s down from 28.8% a decade earlier, just as the financial crisis was reaching its fever point.

And the number of cities where a significant share of homeowners are cost-burdened has dwindled. In 2008, at least 40% of homeowners with a mortgage were burdened across 43 metro areas nationwide. Today, there are no cities where that’s the case.

While homeowners may be less burdened by housing costs, fewer people actually own their homes. Ten years ago, the home-ownership rate was 67.9%, but now it’s 64.8%.

Many of those people who are no longer homeowners have been pushed into the rental market. The country’s rental population has also grown to its largest size ever for as rising home prices and student-loan debt have forced young adults to delay homeownership.

And housing costs remain a major burden for renters, unlike homeowners. The Census Bureau estimated that 40.6% of renters spent 35% or more of their monthly household income on rent and utility bills in 2018. That’s roughly the same share of people as in 2008 (40.8%), but represents more people due to the growth of the country’s rental population.

Households that are forced to pay so much on rent have a harder time saving money to put towards the down payment for a home purchase, making it more difficult to make the transition from renter to homeowner.

Link to Article

Remodel Assistance By Donna

With prices so high now, everyone knows that it’s smart to fully upgrade your house before selling – at least when possible.  But not many sellers do, so buyers get as close as they can and then deal with the rest.  My general rule-of-thumb still applies – expect to spend another $25,000 to $50,000 for upgrading any house you buy!

We are happy to assist our buyers with those upgrades too!

Here are photos of a newer but normal tract house that our buyer thought needed some pizzazz, so Donna coordinated the work before our buyer moved to town.

The TV was on a large, barren wall, and adding an electric fireplace gave it a traditional feel.  But instead of installing it flush, let’s build it out to add some dimension:

This electric appliance kicks out steady heat and has 50+ color combinations!

The kitchen had an off-white antique finish to the cabinets, which looks dirty after a few years. Let’s paint those light gray, change the cabinet pulls, add some modern stools, class up those pendant lights, and install a built-in fridge too:

The master bathroom was base grade:

Let’s ditch the basic wall mirror/medicine cabinet and combo them up instead – with lighting!

How about this new closet by Top Shelf Pull Outs for about $6,500!

Note to self – always take two photos in case someone has their eyes closed!

 

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