Why the Housing Market Is a Powerful Economic Driver

Why the Housing Market Is a Powerful Economic Driver | Simplifying The Market

With businesses starting to slowly open back up again in some parts of the country, it’s important to understand how housing can have a major impact on the recovery of the U.S. economy. As we’ve mentioned before, buying a home is a driving financial force in this process. Today, many analysts believe one of the first things we’ll be able to safely bring back is the home building sector, creating more jobs and impacting local neighborhoods in a big way. According to Robert Dietz in The Eye on Housing:

 “The pace of new home sales will post significant declines during the second quarter due to the impacts of higher unemployment and shutdown effects of much of the U.S. economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will help lead the economy in the eventual recovery.”

The National Association of Home Builders (NAHB) notes the impact new construction can have on the job market:

“Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for all levels of government to support police, firefighters and schools, according to NAHB’s National Impact of Home Building and Remodeling report.”

These employment opportunities, along with the home purchase, drive the economy in a major way. The National Association of Realtors (NAR) recently shared a report that notes the full economic impact of home sales. This report summarizes:

“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”

Here’s the breakdown of how the average home sale boosts the economy:Why the Housing Market Is a Powerful Economic Driver | Simplifying The MarketAs noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:

“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products.
Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”

The same NAR report also breaks down the average economic impact by state:Why the Housing Market Is a Powerful Economic Driver | Simplifying The MarketOn an emotional level, what’s most important for today’s consumers to feel confident about is the safety component that goes into the process. Mitigating the risk of essential personnel at this moment in time is more crucial than ever as we all aim to reduce the spread of the coronavirus. Fortunately, the NAHB has put immense effort into a plan that prioritizes the health and safety of home builders and contractors:

“This is why NAHB and construction industry partners have developed a Coronavirus Preparedness and Response Plan specifically tailored to construction job sites. The plan is customizable and covers areas that include manager and worker responsibilities, job site protective measures, cleaning and disinfecting, responding to exposure incidents, and OSHA record-keeping requirements.”

Bottom Line

Buying a home is a substantial economic driver today, and when new construction picks back up again, it will be an even stronger recovery force throughout the country. If you’re in a position to buy a home this year, you can have a significant impact on your local neighborhoods and safely make the move you’ve been waiting for. It’s a win-win.


Posted on April 30, 2020 at 1:20 pm
Ted Mansfield | Posted in Active listing, Buying a home, Community, Finance, First Time Buyers, Investment, Luxury market, Mortgage, Move Up Buyers, New Construction, Real Estate, Selling your home |

What Impact Might COVID-19 Have on Home Values?

What Impact Might COVID-19 Have on Home Values? | Simplifying The Market

A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy.

 

The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item.

In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.

Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic.

This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

What are the experts saying?

Here’s a look at what some experts recently reported on the matter:

Ivy Zelman, President, Zelman & Associates

“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

Freddie Mac

“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. 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. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

Mark Fleming, Chief Economist, First American

“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

Bottom Line

Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.


Posted on April 27, 2020 at 8:34 am
Ted Mansfield | Posted in Active listing, Buying a home, First Time Buyers, Investment, Luxury market, Mortgage, Move Up Buyers, New Construction, Real Estate, Selling your home |

Uncertainty Abounds in the Search for Economic Recovery Timetable

Uncertainty Abounds in the Search for Economic Recovery Timetable | MyKCM

Earlier this week, we discussed how most projections from financial institutions are calling for a quick V-shaped recovery from this economic downturn, and there’s research on previous post-pandemic recoveries to support that expectation.

In addition, we noted how there are some in the business community who believe we may instead be headed for a U-shaped recovery, where the return to previous levels of economic success won’t occur until the middle of next year. Yesterday, Reuters released a poll of U.S. and European economists which revealed that most surveyed are now leaning more toward a U-shaped recovery.

Here are the results of that poll:Uncertainty Abounds in the Search for Economic Recovery Timetable | MyKCM

Why the disparity in thinking among different groups of economic experts?

The current situation makes it extremely difficult to project the future of the economy. Analysts normally look at economic data and compare it to previous slowdowns to create their projections. This situation, however, is anything but normal.

Today, analysts must incorporate data from three different sciences into their recovery equation:

1. Business Science – How has the economy rebounded from similar slowdowns in the past?

2. Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?

3. Social Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

The challenge of accurately combining the three sciences into a single projection has created uncertainty, and it has led to a wide range of opinions on the timing of the recovery.

Bottom Line

Right now, the vast majority of economists and analysts believe a full recovery will take anywhere from 6-18 months. No one truly knows the exact timetable, but it will be coming.


Posted on April 23, 2020 at 1:48 pm
Ted Mansfield | Posted in Active listing, Buying a home, Finance, First Time Buyers, Investment, Luxury market, Mortgage, Move Up Buyers, Real Estate, Selling your home |

10 Steps to Buying a Home [INFOGRAPHIC]

10 Steps to Buying a Home [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • If you’re thinking of buying a home and you’re not sure where to start, you’re not alone.
  • Here’s a guide with 10 simple steps to follow in the homebuying process.
  • Be sure to work with a trusted real estate professional to find out the specifics of what to do in your local area.


Posted on March 9, 2020 at 8:08 am
Ted Mansfield | Posted in Active listing, Buying a home, Finance, First Time Buyers, Investment, Mortgage, Move Up Buyers, Real Estate |

Existing-Home Sales Report Indicates Now Is a Great Time to Sell

Existing-Home Sales Report Indicates Now Is a Great Time to Sell | Simplifying The Market

Based on the current state of the market, trends are shifting in favor of sellers. If you are going to sell, now may be the time to take advantage of the number of buyers who are searching for their dream home.

 

The best time to sell anything is when demand for that item is high and the supply of that item is limited. The latest Existing-Home Sales Report released by the National Association of Realtors (NAR), reveals that demand for housing continues to be strong, but the supply is struggling to keep pace. With this trend likely continuing throughout 2020, now is a great time to sell your house.

THE EXISTING-HOME SALES REPORT

The most important data revealed in this report was not actually sales. In reality, it was the inventory of homes for sale (supply). The report explained:

  • Total housing inventory at the end of August decreased 2.6% to 1.86 million homes available for sale.
  • Unsold inventory is lower than the 4.3-month figure recorded in August 2018.
  • This represents a 1-month supply at the current sales pace.

According to Lawrence Yun, Chief Economist at NAR,

“Sales are up, but inventory numbers remain low and are thereby pushing up
home prices.”

In real estate, there is a simple guideline that often applies here. Essentially, when there is less than a 6-month supply of inventory available, we are in a seller’s market and we will see greater appreciation. Between a 6 to 7-month supply is a neutral market, where prices will increase at the rate of inflation. More than a 7-month supply means we are in a buyer’s market and can expect depreciation in home values (see below):Existing-Home Sales Report Indicates Now Is a Great Time to Sell | Simplifying The MarketAs we mentioned before, there is currently a 4.1-month supply of homes on the market, and houses are going under contract fast. The Existing Home Sales Report also shows that 49% of properties were on the market for less than a month when they were sold. In August, properties sold nationally were typically on the market for 31 days. As Yun notes, this should continue,

“As expected, buyers are finding it hard to resist the current rates…The desire to take advantage of these promising conditions is leading more buyers to the market.” 

Takeaway: Inventory of homes for sale is still well below the 6-month supply needed for a normal market, and supply will fail to catch up with demand if a sizable supply does not enter the market.

Bottom Line

If you are going to sell, now may be the time to take advantage of the ready, willing, and able buyers who are out there searching for your house to become their dream home.


Posted on October 14, 2019 at 8:22 am
Ted Mansfield | Posted in Active listing, Buying a home, Finance, First Time Buyers, Luxury market, Mortgage, Move Up Buyers, Real Estate, Selling your home |

You Need More Than a Guide. You Need a Sherpa.

You Need More Than a Guide. You Need a Sherpa. | Simplifying The Market

In today’s world, hiring an agent who has a finger on the pulse of the market will make your buying or selling experience an educated one.

 

In a normal housing market, whether you’re buying or selling a home, you need an experienced guide to help you navigate the process. You need someone you can turn to who will tell you how to price your home correctly right from the start. You need someone who can help you determine what to offer on your dream home without paying too much or offending the seller with a low-ball offer.

We are, however, in anything but a “normal market” right now. The media is full of stories about an impending recession, a trade war with China, and constant political upheaval. Each of these potential situations could dramatically impact the real estate market. To successfully navigate the landscape today, you need more than an experienced guide. You need a ‘Real Estate Sherpa.’

A Sherpa is a “member of a Himalayan people living on the borders of Nepal and Tibet, renowned for their skill in mountaineering.” Sherpas are skilled in leading their parties through the extreme altitudes of the peaks and passes in the region – some of the most treacherous trails in the world. They take pride in their hardiness, expertise, and experience at very high altitudes.

They are much more than just guides.

This is much more than a normal real estate market.

The average guide just won’t do. You need a ‘Sherpa.’ You need an expert who understands what is happening in the market and why it is happening. You need someone who can simply and effectively explain it to you and your family. You need an expert who will guarantee you make the right decision, even in these challenging times.

Dave Ramsey, the financial guru, advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.” 

Bottom Line

Hiring an agent who has a finger on the pulse of the market will make your buying or selling experience an educated one.


Posted on October 13, 2019 at 4:55 am
Ted Mansfield | Posted in Active listing, Buying a home, Finance, First Time Buyers, Investment, Luxury market, Mortgage, Move Up Buyers, Real Estate, Selling your home | Tagged , , , , , , , ,

What You Need to Know About the Mortgage Process [INFOGRAPHIC]

What You Need to Know About the Mortgage Process [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Many buyers are purchasing homes with down payments as little as 3%.
  • You may already qualify for a loan, even if you don’t have perfect credit.
  • Your local professionals are here to help you determine how much you can afford, so take advantage of the opportunity to learn more.


Posted on October 11, 2019 at 8:42 am
Ted Mansfield | Posted in Active listing, Buying a home, Finance, First Time Buyers, Investment, Luxury market, Mortgage, Move Up Buyers, Real Estate, Selling your home |

Don’t Be Spooked by the Real Estate Market!

Starting your journey to buy or sell a home can be scary if you aren’t familiar with everything that needs to happen! That’s why you need a trusted advisor to lead you through the whole process. One that will educate you, help you get the best price for your home or make the best offer, and will lead you through the process with confidence! Let’s get together today!


Posted on November 1, 2018 at 11:11 am
Ted Mansfield | Posted in Active listing, Buying a home, First Time Buyers, Investment, Mortgage, Move Up Buyers, Real Estate, Selling your home |

Are You Aware of How Much Equity You Have in Your Home? You May Be Surprised!

Are You Aware of How Much Equity You Have in Your Home? You May Be Surprised! | Simplifying The Market

Are You Aware of How Much Equity You Have in Your Home? You May Be Surprised!

CoreLogic’s latest Equity Report revealed that 675,000 US homeowners regained positive equity in their homes in 2017. This is great news for the country, as 95.1% of all mortgaged properties are now in a positive equity situation.

U.S homeowners with mortgages (roughly 63% of all the properties) have seen their equity increase by a total of $908.4 billion since the fourth quarter 2016, an increase of 12.2%, year over year.”

Price Appreciation = Good News for Homeowners

Frank Nothaft, CoreLogic’s Chief Economist, explains:

Home-price growth has been the primary driver of home-equity wealth creation. The CoreLogic Home Price Index grew 6.2 percent during 2017. The largest calendar-year increase since 2013. Likewise, the average growth in home equity was more than $15,000 during 2017, the most in four years.”

He also believes this is a great sign for the market in 2018, saying:

“Because wealth gains spur additional consumer purchases, the rise in home-equity wealth during 2017 should add more than $50 billion to U.S. consumption spending over the next two to three years.”  

This is great news for homeowners! But, do they realize that their equity position has changed?

A study by Fannie Mae suggests that many homeowners are not aware that they have regained equity in their homes as their investment has increased in value. For example, their study showed that 23% of Americans still believe their home is in a negative equity position when, in actuality, CoreLogic’s report shows that only 4.9% of homes are in that position (down from 6.3% in Q4 2016).

The study also revealed that only 37% of Americans believe that they have “significant equity” (greater than 20%) when in actuality, 83% do!

Are You Aware of How Much Equity You Have in Your Home? You May Be Surprised! | Simplifying The Market

This means that 46% of Americans with a mortgage fail to realize the opportune situation they are in. With a sizeable equity position, many homeowners could easily move into a house (either larger or smaller) that better meets their current needs.

Fannie Mae spoke out on this issue in their report:

“Homeowners who underestimate their homes’ values not only underestimate their home equity, they also likely underestimate 1) how large a down payment they could make with their home equity, 2) their chances of qualifying for mortgages, and, therefore, 3) their opportunities for selling their current homes and for buying different homes.”

Bottom Line

If you are one of the many Americans who is unsure of how much equity you have built in your home, don’t let that be the reason you fail to move on to your dream home in 2018! Let’s get together to evaluate your situation!

 

 

 


Posted on March 21, 2018 at 12:48 pm
Ted Mansfield | Posted in Active listing, Finance, Mortgage, Move Up Buyers, Real Estate, Selling your home |

Open House 10/4, 1-4pm

Close in Bellevue location. Easy access to everything! 3 bedroom, 1 full bath, a 3/4 master bath, and 1/2 bath with rec room (plumbed for a shower, to make a 3/4!). Quiet, non-through street neighborhood on a cul-de-sac. Only $567,500. Open today, 10/4 from 1-4pm.

 


Posted on October 4, 2015 at 8:22 am
Ted Mansfield | Posted in Active listing, Open house |