Will Home Values Appreciate or Depreciate in 2020?

Will Home Values Appreciate or Depreciate in 2020?

Will Home Values Appreciate or Depreciate in 2020? | MyKCM

With the housing market staggered to some degree by the health crisis the country is currently facing, some potential purchasers are questioning whether home values will be impacted. The price of any item is determined by supply as well as the market’s demand for that item.

Each month the National Association of Realtors (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for the REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand) during this pandemic.

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”Will Home Values Appreciate or Depreciate in 2020? | MyKCMThe darker the blue, the stronger the demand for homes is in that area. The survey shows that in 34 of the 50 U.S. states, buyer demand is now ‘strong’ and 16 of the 50 states have a ‘stable’ demand.

Seller Supply

The index also asks: “How would you rate seller traffic in your area?”Will Home Values Appreciate or Depreciate in 2020? | MyKCMAs the map above indicates, 46 states and Washington, D.C. reported ‘weak’ seller traffic, 3 states reported ‘stable’ seller traffic, and 1 state reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the needs of buyers looking for homes right now.

With demand still stronger than supply, home values should not depreciate.

What are the experts saying?

Here are the thoughts of three industry experts on the subject:

Ivy Zelman:

“We note that inventory as a percent of households sits at the lowest level ever, something we believe will limit the overall degree of home price pressure through the year.”

Mark Fleming, Chief Economist, First American:

“Housing supply remains at historically low levels, so house price growth is likely to slow, but it’s not likely to go negative.”

Freddie Mac:

“Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand.”

Bottom Line

Looking at these maps and listening to the experts, it seems that prices will remain stable throughout 2020. If you’re thinking about listing your home, let’s connect to discuss how you can capitalize on the somewhat surprising demand in the market now.

Impact of the Coronavirus on the U.S. Housing Market

Impact of the Coronavirus on the U.S. Housing Market

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The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.

With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?

The National Association of Realtors (NAR) anticipates:

“At the very least, the coronavirus could cause some people to put home sales on hold.”

While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.

For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.

According to the National Association of Home Builders (NAHB):

“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”

This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.

Bottom Line

The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.

The #1 Misconception in the Homebuying Process

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 The #1 Misconception in the Homebuying Process

After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:

 “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.”

CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:

  • 21 states appreciating 5% or more
  • 26 states appreciating between 3-5%
  • Only 3 states appreciating less than 3%

The Misconception

Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.

In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.

Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.

Black Knight, in their latest Mortgage Monitor, addressed this exact issue:

 “Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…

Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”

Bottom Line

If you’re thinking about purchasing a home, realize that homes are still affordable even though prices are increasing. As the Black Knight report concluded:

“Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”

How Interest Rates Can Impact Your Monthly Housing Payments

How Interest Rates Can Impact Your Monthly Housing Payments

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Spring is right around the corner, so flowers are starting to bloom, and many potential homebuyers are getting ready to step into the market. If you’re thinking of buying this season, here’s how mortgage interest rates are working in your favor.

Freddie Mac explains:

If you’re in the market to buy a home, today’s average mortgage rates are something to celebrate compared to almost any year since 1971…

Mortgage rates change frequently. Over the last 45 years, they have ranged from a high of 18.63% (1981) to a low of 3.31% (2012). While it’s not likely that the average 30-year fixed mortgage rate will return to its record low, the current average rate of 3.45% is pretty close — all to your advantage.”

To put this in perspective, the following chart from the same article shows how average mortgage rates by decade have impacted the approximate monthly payment of a $200,000 home over time:How Interest Rates Can Impact Your Monthly Housing Payments | MyKCMClearly, when rates are low – like they are today – qualified buyers can benefit significantly over time.

Keep in mind, if interest rates go up, this can push many potential homebuyers out of the market. The National Association of Home Builders (NAHB) notes:

“Prospective home buyers are also adversely affected when interest rates rise. NAHB’s priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.75% on a 30-year fixed rate mortgage can price over 1.3 million U.S. households out of the market for the median-priced new home.”

Bottom Line

You certainly don’t want to be priced out of the market this year, and waiting may mean a significant change in your potential mortgage payment should rates start to rise. If your financial situation allows, now may be a great time to lock in at a low mortgage rate to benefit greatly over the lifetime of your loan.