Home Prices Have Appreciated 6.9% in 2018

Between 1987 and 1999, which is often referred to as the ‘Pre-Bubble Period,’ home prices grew at an average of 3.6% according to the Home Price Expectation Survey.

Every month, the economists at CoreLogic release the results of their Home Price Insights Report, which includes the actual year-over-year change in prices across the country and their predictions for the following year.

The chart below shows the forecasted year-over-year prices for 2018 (predictions made in 2017). According to their predictions, the average appreciation over the course of 2018 should be 4.8%, which is still greater than the ‘normal’ appreciation of 3.6%.

If we layer in the actual price appreciation that has occurred this year, we can see that over the course of 2018, home prices have appreciated by an average of 6.9% and have outpaced projections all year!

What does this mean?

The tale of today’s real estate market is one of low inventory, high demand, and rising prices. The forces at work can be simply explained with the theory of supply and demand. That being said, if a large supply of inventory were to come to the market, prices may start to appreciate closer to the forecasted rate which would STILL be greater than the historic norm!

Bottom Line

If you are a homeowner whose house no longer meets your needs, now may be a great time to list your home and capitalize on the equity you have gained over the last year to make a significant down payment on your next home!

4 Reasons Why Fall Is A Great Time to Buy A Home!

Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Insights report reveals that home prices have appreciated by 6.2% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.1% over the next year.

Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have already increased by half of a percentage point, to around 4.5% in 2018. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by half a percentage point to around 5.1% by this time next year.

An increase in rates will impact your monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You Are Paying a Mortgage

There are some renters who have not yet purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to build equity in your home which you can then tap into later in life. As a renter, you guarantee your landlord is the person building that equity.

Are you ready to put your housing cost to work for you?

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Why are Existing Home Sales Down?

The latest Existing Home Sales Report issued by the National Association of Realtors (NAR) revealed that home sales have decreased for four consecutive months and are at their slowest pace in over two years. This has some industry leaders puzzled considering the fact that the economy is strengthening, unemployment is down, and wages are beginning to rise. This begs the question: “Where are the buyers?”

Actually, agents in the field of most communities are still seeing strong desire from prospective purchasers. They have a list of potential buyers ready to go if the right houses come on the market and they claim it is not a shortage of demand, but is instead a shortage of inventory that is causing the market to soften.

Why is there a shortage of inventory?

You only need to look at the graph below to understand:

New construction sales over the last ten years are far below historic numbers from 1995-2002.

A recent industry report looked at building permits and concluded:

“If construction over the past decade matched historic norms, accounting for population change, the country would have had 2.3 million more single-family home permits.”

That decade of not building enough homes is the primary reason for the concerns about today’s market.

Wait, weren’t we talking about ‘existing’ home sales?

Some may argue that NAR’s sales report deals with existing home sales and not new construction, and they would be correct. However, reports have shown that one of the main reasons why existing homeowners are not selling is because they can’t find homes that meet the needs of their current lifestyles. Historically, the upgrades in a newly constructed home were the answers to those needs.

Over the last decade, however, there were fewer homes built to satisfy this move-up seller. Consequently, there are many homeowners who stayed in their homes for a longer tenure, instead of putting their homes up for sale.

Bottom Line

As more new homes are being built, there will be more housing inventory to satisfy current demand which will cause prices to moderate and sales volumes to increase.

Financing First

Homeownership is a Dominant Gene

There are many things that factor into the decision to buy a home. New research from the Urban Institute suggests that one of those things may be inherited from your parents.

Children are More Likely to Own a Home if Their Parents Did

According to an analysis of millennial homeowners, the homeownership rate of those whose parents rent their homes is 14.4%, while the rate amongst millennials whose parents are homeowners is 31.7%!

“A young adult’s odds of homeownership are highly correlated with their parent’s homeownership.
Without controlling for such factors as age, income, education, marital status, and race or ethnicity, there is a 17 percentage-point gap between the homeownership rate for young adults whose parents are renters and young adults whose parents are homeowners.”

The study also revealed that as a parent’s net worth increases, so does the likelihood that their child will own a home. These two findings are not surprising as we know from the Survey of Consumer Finances that a homeowner’s net worth is 44x greater than that of a renter.

So, a parent who is a homeowner will have more wealth which will, in turn, increase the chances that their children will own their own homes in the future.

Below is a breakdown of the relationship between a parent’s wealth and a millennial’s likelihood to own a home.

The Good News: The high homeownership rate amongst baby boomers (likely the parents of many millennials) is a great sign that millennials will want to own homes. We are already seeing this in the high-demand environment that we are currently experiencing in the starter and trade-up markets.

Bottom Line

Even though millennials took longer than many of the generations before them to start home searches of their own, the data shows that they will not be waiting much longer!

Home Sales Expected to Continue Increasing in 2019

Freddie Mac, Fannie Mae, and the Mortgage Bankers Association are all projecting that home sales will increase nicely in 2019. Below is a chart depicting the projections of each entity for the remainder of 2018, as well as for 2019.

As we can see, Freddie Mac, Fannie Mae, and the Mortgage Bankers Association all believe that homes sales will increase steadily over the next year. If you are a homeowner who has considered selling your house recently, now may be the best time to put it on the market.

Seller Slip-Ups