Will the Housing Market Bloom This Spring?

Will the Housing Market Bloom This Spring? | MyKCM

Spring is almost here, and many are wondering what it will bring for the housing market. Even though the pandemic continues on, it’s certain to be very different from the spring we experienced at this time last year. Here’s what a few industry experts have to say about the housing market and how it will bloom this season.

Danielle Hale, Chief Economistrealtor.com:

“Despite early weakness, we expect to see new listings grow in March and April as they traditionally do heading into spring, and last year’s extraordinarily low new listings comparison point will mean year over year gains. One other potential bright spot for would-be homebuyers, new construction, which has risen at a year over year pace of 20% or more for the last few months, will provide additional for-sale inventory relief.”

Ali Wolf, Chief Economist, Zonda:

“Some people will feel comfortable listing their home during the first half of 2021. Others will want to wait until the vaccines are widely distributed. This suggests more inventory will be for sale in late 2021 and into the spring selling season in 2022.”

Freddie Mac:

“Since reaching a low point in January, mortgage rates have risen by more than 30 basis points… However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”

Mark Fleming, Chief Economist, First American:

“As the housing market heads into the spring home buying season, the ongoing supply and demand imbalance all but assures more house price growth…Many find it hard to believe, but housing is actually undervalued in most markets and the gap between house-buying power and sale prices indicates there’s room for further house price growth in the months to come.”

Bottom Line

The experts are very optimistic about the housing market right now. If you pressed pause on your real estate plans over the winter, let’s chat to determine how you can re-engage in the homebuying process this spring.

Are we in for a repeat of 2008?

Are we heading into a bubble? Sources say No.

While many businesses have struggled throughout 2020, the Real Estate industry has continued to see rising home values and record sales.  Families who hunkered down together had lots of time to contemplate whether or not their current home still served their needs.  Many decided it was time to make a change.
With homes receiving multiple offers and buyers scrambling to make quick decisions, prices increased over 10% in most areas.  With no apparent end in sight, these conditions look eerily like those that preceded the market crash in 2008.  Here are the reasons that make this time different.
1.     The demand for homes is far exceeding the supply. 
Prices for all items are driven by the laws of supply and demand.  Real Estate is no exception. When homes are scarce, the prices will rise creating what we call a Sellers’ Market. Unlike items that are manufactured, you cannot just “make more widgets”.  Inventory must be built up gradually by more builders building, or more sellers selling.  In 2008, home values continued to rise despite close to 12 months of available inventory.  Our current inventory is at an all-time low of only 1 – 2 months of inventory.  This situation causes prices to rise naturally.
2.        Lenders have raised the criteria for getting a mortgage. 
Prior to 2008, if you were breathing, you could generally get a mortgage.   The ease of getting a mortgage is measured by the Mortgage Credit Availability Index (MCAI).   Developed by the Mortgage Bankers Association, the higher the number, the easier it is to get approved.  Around 2006 this number had skyrocketed to over 868 from a previous average of around 400.  Today’s number sits around 122 and buyers go through vigorous scrutiny before receiving their final “Clear to Close.”
3.       Today’s Homeowners maintain a strong equity position.
The fallacy that homes always increase in value, previously led homeowners to treat their homes like a bank account and pull out money for items that did not increase the value of their home.  The truth is, real estate IS cyclical, and values CAN go down.  This usually happens in 7–10-year cycles. Today’s homeowners are better prepared.  Close to 40% of homeowners own their homes free and clear, and many more are classified as equity-rich, owing less than 50% of their home’s estimated market value.
What does this mean for anyone thinking of buying and selling?
While we see no significant market correction looming soon, most homeowners are in a better position for any market fluctuations that may occur in the near future.  Sellers continue to see quick sales, few repair requests, and record profits. Buyers are challenged to find homes, but those who persevere find that historic low mortgage rates still make this a great time to buy.  Without a crystal ball, no one knows just how long these good times will last.  Contact me today if you would like to know the true value of your home, or have any other market-related questions I can answer.