Episode 19
Housing Market Update - October 2023
Join me on this episode of the Get Me Ready to Buy Podcast as we discuss the October 2023 housing market update, where we debunk three common myths surrounding the United States housing market. Discover the latest trends in inventory, equity, and home prices as I provide an insightful analysis of the current and future state of the market. Don’t miss out on this informative episode!
- 1:10 - Foreclosures Are Increasing
- 4:05 - Wall Street Is Buying Every Home in America
- 10:32 - AirBNBs Will Crash the Housing Market
- 13:49 - Inventory
- 17:19 - Equity
- 22:05 - 3 Major Advantages to Having That Equity
Transcript
1:10 - Foreclosures Are Increasing
So the very first myth we're going to deal with is the myth that foreclosures are increasing.
Speaker A [: at what we currently have in: Speaker A [:It got up to almost five and a half, 550,000 during the Pandemic during the housing crisis years of 20 08 20 09 20 10, we're not anywhere near any of that. So even though the headlines may be technically correct, they are misleading in what they're trying to get you to believe. I know a lot of people who bought homes back in 20 08 20 09 20 10, got good deals on them, upgraded those homes, sold them a few years later, and made some money on those properties. I have questions from time to time of people saying, hey, can you help me find a foreclosure property? Well, I can help you. Are we likely going to find something? Not very likely. I also have folks that are concerned about foreclosures and what their home could be. Any foreclosure is difficult for the homeowner going through it. Whether single family, whatever, it's difficult for them.
Speaker A [:I would have a conversation with my lender if I was in trouble with being able to pay my mortgage back. I'd have a conversation with my lender about what are my options. My options may be that they can tack on some payments at the end, we might can renegotiate some things. It also may be possible for them to help you get that home sold before it goes into foreclosure. If you're facing foreclosure, your credit score, credit report is probably not in the best of shape. It's probably not the only thing you're behind on. But if you go through a foreclosure, it's going to be even worse. So try to avoid the foreclosure.
Speaker A [:If you're facing that, just know that foreclosures are increasing. It's bad for anybody that has to go through it. But we don't have a level of foreclosures that we had pre Pandemic.
4:05 - Wall Street Is Buying Every Home in America
Another myth is that Wall Street is buying every home in America. There are some institutional buyers in our market that seem to be buying up a lot of homes. People are frustrated with that. How can we keep the landlords out of our neighborhoods? How can we compete with the cash offers? Back during the pandemic years, it was cash offers well above the appraised value. It just was difficult to compete against.
Speaker A [: ibuyers, bought a little over: Speaker A [: ened in the second quarter of: Speaker A [: ases in the second quarter of: Speaker A [: re you live, it could be six,: Speaker A [:Of the sellers who are potentially selling their homes decide to rent, probably because interest rates, they're having difficulty getting their property sold. They're not sure what they want to do. Maybe it's a short term thing. They're moving away for a few years for job, but then they're going to move back to where they currently live, so they're deciding to rent instead of sell, whatever the case may be. Those are some of the purchases that some of the sales that are not happening because these sellers are deciding to rent their property out. And apartments are also having an impact on that. Apartment construction, according to the Housing Scene column, is roaring along at a 40 per year high. That means more choices for renters, likely at lower rents as everyone jockeys for tenants.
Speaker A [:There is an apartment complex being built a mile and a half away from my home. It's in an area where there are no other apartment complexes. There's not even any, probably within 5 miles of where this one is, but they're putting one up here. It's in a high demand area. The rents are high, the mortgage payments are high. Tenants occupants can live in the neighborhoods that they want to live in and live in an apartment for a period of time, maybe long term, maybe short term, whatever that may be, but it's another option for folks. And these apartment builders want occupants. They want tenants in their properties.
Speaker A [: ction, home builders now back: Speaker A [:We're not going to see, don't expect to see a huge turnover of investment properties from folks that are planning to sell over the next couple of years.
10:32 - AirBNBs Will Crash the Housing Market
A third myth that you may be hearing, not so much in my area because this isn't a thing where I live, as much of a thing as in other areas. But airbnbs will crash the housing market. There's some concern that they're going to crash the housing market because of some feel like it's creating some instability in the housing market. A short term rental survey from Realtor.com and Census wide said that 59.8% would consider renting out their current house rather than selling it if they were able to buy or rent another home in the future. So are homeowners sellers, potential sellers, going to turn to airbnbs? 60% said they would consider it. Around 20% said it would be great to have the extra income from a renter. And around 18% said the idea of owning a rental or investment property appeals to me.
Speaker A [: , that's down to: Speaker A [: term rentals. At the start of:13:49 - Inventory
housing market as of October: Speaker A [: And you can see this.: Speaker A [: s time last year in August of: Speaker A [:What that's talking about? What that has an impact on is it has an impact on new listings because people with these lower mortgage rates aren't as likely to sell. So these lock in rates limit new inventory. The current loans with the mortgage rate at the time of origination, if they've got a three or less percent, they're not selling three to 4%, they're probably not selling those that have four to 5%. They're going to think really hard about selling their home before they actually sell it. You'd see some of these with higher rates that are more likely to sell. That's going to shrink the number of homes coming on the market because more people are choosing to stay in them because they've got their rates locked in. So low mortgage rates tend to be less relevant to older homeowners. One in 4% us.
17:19 - Equity
Homeowners say high mortgage rates wouldn't impact their decision because 43% of them won't need a new mortgage. They have enough equity in their home that they'll be able to sell their current home and pay cash for their next home. More than likely they would as older owners. They're likely downsizing, moving to an area, be closer to kids, especially closer to grandkids. I understand that. Or maybe moving into some type of assisted area, something with a smaller yard, a smaller house. They're empty nesters or older singles living alone. They're going to be able to pay cash for their home when they buy it.
Speaker A [: through the second quarter of: Speaker A [: ed since the first quarter of: Speaker A [: tate was a good investment in: Speaker A [:If you want to cash out now, invest $100,000. You'd have $300,000 now across the nation as an average. Maybe more, maybe less. So here's what we're looking at. Mortgaged homes with more than 50% equity, and that's going to be this 30% line, that dark green 38.7%. That's people who own their home free and clear, whatever they sell it for is theirs. 20.8% have 30% to 50% equity, 8.6% have ten to 30% equity, and you can see what the rest of them are there. So almost 69% have either paid off their mortgage or have at least 50% equity in their home, meaning they're going to have some money to purchase a home when they sell that home.
Speaker A [:According to CoreLogic, the second quarter equity report, the average US. Homeowner now has about $290,000 in equity. Wow. That may not completely buy a home, but it will go for a long way in buying a home, at least in our market. There are some new construction homes that you can get in for under $300,000. And by the time you add the owners or the builders incentives, by the time you add the builders incentives, they wouldn't need much more than 290 to be able to purchase that home and pay cash for it. And that would be a brand new construction. Home may not be built as well as a home built 20 or 30 years ago, but it's still a brand new home.
22:05 - 3 Major Advantages to Having That Equity
Three major advantages of having equity number one, the ability to be an all cash buyer. Number two, the ability to give a larger down payment. You might put $200,000 down on a $400,000 house. That's going to go a long way in decreasing your monthly payment and possibly getting you a better interest rate because you're not borrowing as much. The bank, the lender is not in as much risk, and you're able to have access to assisted living residences. We're facing that with my mother and my mother in law. They're getting older. Neither one of them are going to be moving into an assisted living facility anytime soon.
Speaker A [:Matter of fact, we're about to begin construction on a wing for my mother in our home. And at some point I'm sure that my mother in law will be with us because we're going to take care of them as best as we can. But the cash that you have that they would have when my mom sold her home, she's able to pay cash, all cash for this build and still have plenty of cash left over to enjoy life. But that's going to give an opportunity for these sellers, because of that equity, to be able to decide on their own where they want to live out the rest of their days. What is all this having to do with current home price appreciation? It has some impact on it. Home prices aren't falling anymore. The surprisingly quick recovery suggests that the residential real estate downturn is turning out to be shorter and shallower than many housing economists expected after mortgage rates soared last year. That was from Wall Street Journal.
Speaker A [: also during the early part of: Speaker A [: month and it happened back in: Speaker A [:We're still seeing those rates go up. Overall, it appears the reduction in supplies outweigh the decrease in demand. Thus house prices have started to increase even as sales have fallen. That's from Freddie Mac. In the mortgage market outlook, we say a balanced market is six months of inventory. Currently, in the county I live in, we have, I believe, 2.3 months of inventory. And in Shelby County, just the county north of us, we're at a little over 3%. That's still considered a seller's market.
Speaker A [: n housing prices from July of: Speaker A [:Those increases aren't as high as they were. Like CoreLogic. July was 0.4 and June was 1.6k. Shiller, June was zero seven and July was zero six. FHFA saw a reverse. They saw a 0.4% increase from June over May and a 0.8% increase from July over June. All this to show that our home values are still increasing. We thought the end of last year we were going to see a downturn.
Speaker A [: g month over month. So far in: Speaker A [:That's what all this is saying. The top 20 cities that Case Jiller takes a look at, they've all seen an increase. People wonder what's going on in California and Los Angeles, 1.1% increase in July over the previous month. You can see in Phoenix, 1% increase. San Diego, 1.5% increase. Seattle, the whole West Coast, if you're looking at national news that I follow, is the whole West Coast is going crazy. We're still seeing home price on the West Coast increase. If you're in markets.
Speaker A [:Boise has been taking a hit. New Orleans is taking a hit, and so is Austin. Those home prices are not keeping up right now, but those are the anomalies that's happening in a few markets around the country. But what we're still seeing is home prices. Home values are still increasing. What are they going to do in the future? Who knows? But let's take a guess anyway. According to CoreLogic, high mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In our market, that's about 4%.
Speaker A [:In other words, home prices are still growing, but are in line with historic seasonal expectations. The 49 year average monthly price movement. You can see what they typically do. The summer months are months when more people want to move. So obviously there's a greater demand for homes. There's more buyers on the market. Home prices are going to go up. They still increase, but not at that same rate as you get into the fall of the year.
Speaker A [: year average versus: Speaker A [: high of a rate of increase in: Speaker A [: n was in January, February of: Speaker A [:Anything can happen, but we don't see those. So if you're a buyer, you're not going to get that home at a better price than today. If you can afford the payment, whatever the interest rate is, if you have the money saved up to make your down payment, consider very seriously making a buy now. Especially if you find the home that you want with what you want in it, where you want it, now may be the best time for you to buy. Now may be when you need to wait to buy. Only. You know that. Having a conversation with your lender, with your real estate agent.
Speaker A [:If you don't have one, I'll be happy to have a conversation with. You or find one in your local market. If you're thinking about selling you're a homeowner, you still might want to sell because buyers are still hungry. Buyers are out there looking. If you own investment property, you may want to sell. We need some more homes on the market to bring some more competition out there to draw some buyers out. Plus with what's going on with the rents and things, you may decide that you want to cash out and get that equity where you bought that investment property five years ago. You've got 30, 40, 50% equity now in that home built up into it.
Speaker A [:You've paid off some mortgage because that renter. The tenant has been paying that mortgage for you. So you've captured the principal that's been paid down plus the appreciation. You may want to cash out. The point is, don't listen to all the headlines. Make a decision that's best for you and whoever you're buying or selling with. Have a conversation with the professionals in the industry. Reputable real estate agents and reputable lenders will not try to get you to sell or to buy just so that we can earn a paycheck.
Speaker A [:That's not why I do it, that's not why I'm here. My bottom line is helping you have all the information you need to be confident in your home selling or your home buying decision, whatever that may be. Look at the facts, not just the headlines. Peek behind the curtain to see what's right for you in your market at this time.
