Discussing slowing home price growth, home buyer demand and increasing home equity makes now a good time to sell, you probably make less than your parents, an uneven recovery in home prices plus much more!
Home Price Growth Slows
U.S. single family homes and condos sold for a median price of $255,000 in the second quarter, up 6.3 percent from a year ago to a new all-time high but the slowest annual appreciation since Q2 2016.
Daren Blomquist, senior vice president at ATTOM said:
Annual home price appreciation nationwide has now slowed for five consecutive quarters following a post-election spike to double-digit appreciation in the first quarter of 2017. Although home sellers are still in the driver’s seat of this housing market, moderating home price appreciation is good news for prospective homebuyers and signals that rising mortgage rates and other housing headwinds are cooling red-hot home price appreciation in some areas.
Could slower price growth help with the predictions of a slowing housing market that I discussed yesterday? It does not surprise me that home price growth would slow down to be closer to the historical normal level.
Attom is only saying that the pace of US home price growth is decreasing NOT that home prices are falling. Talking to a local Realtor is your best bet to know what is happening with home prices in your area.
Blomquist mentions that home sellers are still in the driver’s seat of today’s housing market. This is due to the very strong demand and limited supply of homes for sale.
According to NAR, the number of homes for sale has fallen year-over-year for 36 consecutive months. NAR said that there is a 4.1-month supply.
A 6-month supply of inventory is considered a balanced market. Below 6 months is considered a seller’s market and above 6 months is a buyer’s market.
Can we expect to see an increase in the number of homes for sale? Probably not according to a report from CoreLogic that 4 times as many renters are planning to buy in the next year compared to the number of owners that are planning to sell.
How many home owners understand how the strong demand from buyers has caused the value of their home to increase? Over the last 12 months, the average US homeowner gaining over $16,000 in equity!
Check out this map showing the average increase in equity by state:
The way that home prices have increased combined with the strong demand does make today a great time to sell a home.
Fewer Americans Make More Than Their Parents Did
One of the most striking social science findings of recent years is that only half of today’s 30-year-olds earn more than their parents. Raj Chetty and his coauthors showed that rates of absolute mobility—that is, the share of children with higher inflation-adjusted incomes than their parents—declined from around 90 percent for children born in 1940 to just 50 percent for those born in 1984.
If we are looking at possible causes for the decrease in the home ownership level, this is good candidate! While correlation is not causation, it is a strong possible cause for fewer people buying a home.
An Uneven Recovery in Home Prices
The tremendous rebound in home values from the Great Recession has relieved pocketbooks and created wealth nationwide – but the recovery has been uneven.
While 50.4 percent of U.S. homes are currently worth as much or more than they were prior to the housing bust, a much greater share (57.1 percent) of homes valued in the top third nationally have rebounded than homes valued in the bottom third (39.7 percent). Condos and co-ops also are struggling to make their way back to prior peaks, with just 38 percent having fully rebounded, compared with 52 percent of single-family homes.
Interesting but considering this is coming from Zillow and they are talking about the entire country, it does not tell you what is happening in your local market. You have to think about how the demand differs for homes in different price ranges.
In Anderson County, you will see more demand for homes between $100,000 and $200,000 and homes in higher price ranges. But this does not mean that someone selling a home that is worth $150,000 should list their home at $175,000.
I have not seen any changes in the higher price ranges in our area. Maybe sales volume is a tad lower or home price growth is not as robust as homes between $100,000 and $200,000.
But that is more because of the extremely strong demand for homes between $100,000 and $200,000. It has nothing to do with a negative impact of the tax refrom.
Many “experts” said that tax reform would hurt the market for higher priced homes. The new tax code limits the deduction of state and local property taxes, as well as income or sales taxes, to a total of $10,000.
The limit of the mortgage interest deduction could hurt those that itemize. Which is many of the same people that own homes in the top price tiers.
NAR was especially critical of the changes to the mortgage interest deduction and said that home prices would decrease in “high price, high tax areas”. Which makes using NAR’s own data from their Existing Home Sales report to show that tax reform did not cause the damage they predicted.
Check out how home sales for the higher price ranges:
- Homes sales between $500,000 – $750,000 are up 11.9%
- Homes sales between $750,000 – $1M are up 16.8%
- Homes sales over $1,000,000 are up 26.7%
Trulia also confirmed that people were STILL looking at higher priced homes in Q1 2018. Trulia said that searches for “premium” homes as a percentage of all searches increased 3% in q1 2018 compared to Q4 2017.
This certainly contradicts the hysteria about tax reform hurting the high end of the housing market. Over reacting or panicking is not how to react to most situations…
While I am not a fan of how the tax reform benefits the rich more than the majority of Americans, I do not see any negative implications for higher priced homes due to tax reform.
FHFA Director Accused of Sexual Harrassment
A Federal Housing Finance Agency staffer has filed an Equal Employment Opportunity complaint against FHFA Director Mel Watt after he reportedly made inappropriate sexual advances when she tried to discuss career and salary concerns.
Remember that everyone is innocent until proven guilty. But there is a recording of Watt that could be pretty damning.
Proposed Changes to Public Housing Could Endanger Kids
In April, Housing and Urban Development Secretary Ben Carson released a proposal for what the administration calls “rent reform” in public housing. If Congress passes the Making Affordable Housing Work Act, single parents could be forced to leave their children in unsafe conditions to meet the law’s new work requirements — and could even lose their kids.
According to HUD, 34 percent of the U.S.’s 1 million public housing units are headed by a single adult with children. Under current rules, the government calculates how much a family can afford to pay in rent for public housing by taking into account “any reasonable childcare expenses” the family incurs for kids under age 13 while a parent is working or pursuing education. The new legislation eliminates this deduction, as well as deductions for medical care.
At the same time, the bill raises rent on poor families and allows housing authorities to require that adults work. Rent would be calculated by taking 35 percent of the family’s income or 35 percent of the money a person would earn by working 15 hours per week at the federal minimum wage — regardless of whether they actually work.
The good news is that HUD has delayed implementing these changes BUT they could implement them later. I am not sure HUD considered the potential negatives of raising the rents of the poor.
Surprise! Wall Street Is a Crappy Landlord
Invitation Homes led big money’s charge into single-family rentals. Critics say tenants’ complaints show it skimps on upkeep, piles on fees to please investors.
Invitation Homes, the largest landlord of single-family houses in the U.S., boasts of providing a uniquely “worry free” experience. Tenants don’t always agree, and critics of big money’s push into the business say complaints about skimpy upkeep and excessive fees show the company puts investors first.
Not really surprising but eventually treating your customers badly will affect your business. Plus, not maintaining your properties is a truly bone headed move for any rental property owner.