Discussing home prices and if home prices are too high, can manufactured homes solve the affordable housing shortage, essential home features, home improvement in 2018, the tight lending myth, home flipping increases and much more
US Home Prices Increased Over 6.6% Year Over Year
Home prices nationally increased year over year by 6.6 percent from January 2017 to January 2018, and on a month-over-month basis home prices increased by 0.5 percent in January 2018 compared with December 2017,* according to the CoreLogic HPI.
Dr. Frank Nothaft, chief economist for CoreLogic, said:
Entry-level homes have been in particularly short supply, leading to more rapid home-price growth compared with more expensive homes. Homes with a purchase price less than 75 percent of the local area median had price growth of 9.0 percent during the year ending January 2018. Homes that sold for more than 125 percent of median appreciated 5.3 percent over the same 12-month period. Thus, first-time buyers are facing acute affordability challenges in some high-cost areas.
This is the 6th consecutive month that US home prices have increased over 6% YoY. Interesting about the lower priced homes appreciating faster than higher priced homes. Read on…
Lower Priced Homes Appreciating the Fastest
While affordability remains better than long-term averages nationally, home prices at the lower end of the market are less affordable than the national average, particularly for those in lower income levels.
Very interesting. They said that properties in the lowest 20% of home prices have been the fastest-appreciating segment of the market for 67 consecutive months.
This is a national report and does not reflect what is happening in every market. Because there is such a wide range of home values in our area, I would be hesitant to say this is true in Anderson County.
The properties in the lowest 20% priced homes in our area are selling for less than the properties in the lowest 20% priced homes other areas of the country. I would say that starter homes or homes in the $100,000 to $200,000 price range are seeing the most sales and demand in our area.
Roughly 44% of the homes sold in Anderson County in the past year have been between $100,000 and $200,000. Roughly 22% of the homes sold during the same time period were under $100,000. Less than 8% of the homes sold were under $50,000.
As you can see, the demand is not highest in the lowest 20% price range in Anderson County. Supply and demand drives home price appreciation. The demand is greatest in Anderson County for homes between $100,000 and $200,000.
Really, every home and every market is different. You need to get a local Realtor to do a CMA to see what is possible or normal for homes like yours. Home prices have increased but please do not let national reports to confuse you.
That being said, let’s shift back to what Black Knight reported:
- Total US loan delinquency rate is up 1.31% YoY
- Total US foreclosure pre-sale inventory rate is down 30.35% YoY
- Total US foreclosure starts down 11.51% YoY
Not really bad but the YoY increase in delinquencies is concerning. Still this is national and not local so remain calm and call your Realtor!
Have Home Prices Increased Too Much?
After these 2 reports on home prices, you may be thinking that home prices are increasing too fast. Or that home prices have increased too much.
If we look at the data from NAR’s most recent Existing Home Sales Report, we see that home prices increased year-over-year for 71 consecutive months!
That certainly gives you a good reason to think that home prices are increasing too much or too fast. But if we dig into the data, we find that home prices actually are about where they should be.
Consider this quote from Zillow:
If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.
Check out these charts showing that home prices are exactly where they should be:
US Existing Home Median Sales Price 2000 to 2017
You can see that home prices increased, fell and have increased again. But what if the housing market had not crashed?
Check out the chart showing where home prices would be IF there had not been a crash:
The blue bars show where home prices would be if they had appreciated by 3.6% ( the normal annual appreciation rate ). If we add 3.6% to the median home price in 2000 and do that for every year since then, you see that home prices are where they should be today.
Home prices were inflated in the housing market boom and too low after the market crashed. But today, home prices are actually where they should be IF the crash never happened and homes prices had increased at the normal pace!
This is showing data for the entire country and may not reflect what is happening in each and every local housing market. If you have questions about home prices in the Anderson SC area, you can Contact Me!
Can Manufactured Homes Be a Solution to the Lack of Affordable Homes?
America’s affordable housing crisis is driven in large part by the simple fact that there aren’t enough homes in America right now to satisfy demand. High construction costs and labor shortages mean builders can’t build fast enough to keep up with household formation, and Americans who already own homes are reluctant to sell an asset that is appreciating rapidly.
This has pushed home prices to or beyond their pre-financial collapse peaks, leaving prospective homebuyers without an affordable option. While there’s no easy fix, signals within the federal government suggest one solution is getting increased attention—manufactured housing.
Fannie Mae and Freddie Mac, the government-sponsored mortgage facilitators, announced plans in January to make the manufactured housing market more active by purchasing more manufactured housing loans over the next three years.
A few weeks later, the Department of Housing and Urban Development (HUD) announced it was reviewing regulations around manufactured housing in response to President Trump’s executive orders to reduce regulations.
This sounds great IF they address the problems that buyers have when they want to purchase a previously owned manufactured home. If the home does NOT qualify for FHA financing, many buyers will find that getting financing is hard if not impossible.
This affects sellers since it means the pool of potential buyers is dramatically reduced. If the home is newer, there are ways to make the home “FHA-able”.
What Features Do Home Buyers Consider Essential?
NAHB recently did a poll and found that both first time home buyers and second time home buyers think a living room and laundry room are essential home features. First time buyers rank a living room above a laundry room but the order is reversed for second time home buyers.
I strongly suggest you think long and hard about what you want versus what you need when buying a home. There is a difference!
Home Improvement to Increase in 2018
If you own a house in the U.S., odds are you are planning a home improvement project. In fact, 58 percent of homeowners say they plan to spend money to make their homes a little sweeter this year.
That’s just one of the key findings from the 2018 LightStream Home Improvement Survey, an annual look at homeowners’ renovation plans. From rising budgets to increasing rates of outdoor, bathroom and kitchen remodeling, there are many signs that homeowners are feeling optimistic and ready to show their homes a little love. Forty-five percent plan to spend $5,000 or more on their projects (an all-time survey high), and the percentage of people planning to make the “big spend” — $35,000 or more — doubled from 2017.
There are several reasons people are looking to improve their homes. The extremely low levels of homes for sale in many areas is causing people to remodel and stay instead of moving up.
The length of time that people are owning a home has increased and it only makes sense to take make your home better. Remember to think about IF you will be able to get most of the money you spend back when it comes time to sell someday!
The Tight Lending Myth
From Logan Mohtashami:
Those who follow housing economics in America have heard, for many years now, that tight lending conditions are holding back a full housing recovery. If you have been following my posts, however, you know that I have been saying something completely different. Since I first starting writing about the housing market in 2010, I have stuck to the same premise that in this housing cycle (from 2008 to 2019, we simply have not had enough qualified buyers to drive the demand needed for a real recovery – if cash buyers are excluded from the analysis. You may argue, then, that the conditions that determine if a buyer is qualified are too strict. Nay!
It is a cash flow problem, not tight lending conditions that has stifled demand in this cycle. Since 2008, all one needs is a 620 FICO score, 3.5% down and a debt to income ratio of 43-50% in order to qualify for a mortgage. That is not tight lending! This doesn’t mean that home sales won’t grow or prices won’t rise, however. The good news is that we already have the longest job expansion on record, soon to be 89 straight months, we will soon have the longest economic expansion ever in U.S. history next year and mortgage rates have been below 5% since early 2011 with over 154,000,000 people working and 88% of our prime age work force are working full-time.
I am not sure how or where I first got turned on to Mohtashami’s blog but he consistently knocks it out of the park. This is a must read and drives home that lending isn’t too tight.
If it makes sense for someone to buy a home, it makes sense. If it does not make sense, it does not make sense.
Blaming tight lending conditions for a complete recovery in housing just won’t fly. If buying a home makes sense for you, then talk to a mortgage professional.
Because mortgage lending is NOT too tight!
Will We See Outdated Financial Regulations Fixed?
From The Hill:
The House on Tuesday easily approved a bipartisan bill requiring financial regulators to more frequently conduct comprehensive reviews of their banking regulations.
The legislation amends the Economic Growth and Regulatory Paperwork Reduction Act to require the Federal Financial Institutions Examination Council and each federal financial agency to conduct a regulatory review every seven years.
The 1996 law only requires financial agencies to conduct regulatory reviews every 10 years and exempts agencies such as the independent Consumer Financial Protection Bureau and National Credit Union Administration from the required reviews.
This is supposed to help with outdated regulations that are hurting small banks and lending institutions. Critics are saying it is a push to deregulate and unleash reckless behavior by Wall Street.
I think we need common sense laws and regulations so this seems like a good idea to me. We need to make sure the big banks and Wall Street do not use this as an opportunity to once again screw up the economy.
Home Flipping Increases to 11-Year High
According to Attom Data Solutions, there were more than 200,000 homes flipped in 2017. This is the second consecutive year that over 200,000 homes were flipped.
This is the highest level of homes being flipped since 2006. I know we saw high levels of flipping before the market crashed but they say we are not seeing the same thing this time.
Daren Blomquist, senior vice president at ATTOM Data Solutions, said:
The surge in home flipping in the last three years is built on a more fundamentally sound foundation than the flipping frenzy that we witnessed a little more than a decade ago. Flippers are behaving more rationally, as evidenced by average gross flipping returns of 50 percent over the last three years compared to average gross flipping returns of just 31 percent between 2004 and 2006 — the last time we saw more than 200,000 home flips in consecutive years.
And while financing for flippers has become more readily available in recent years, 65 percent of flippers still used cash to buy homes flipped in 2017, nearly the reverse of 2004 to 2006, when 63 percent of flippers were leveraging financing to buy.
There is plenty of demand for affordable homes so I would think this segment of the market is the one to target when flipping.
However, you cannot ignore the strong demand for rentals making a buy and hold strategy attractive as well.
The key is to understand the local real estate market and know what is happening. You can find out more about market conditions in Anderson County by reading the Market Reports!
Well that is all I have time for today! Be sure to hit the share buttons and subscribe so you never miss another post!