Discussing home prices, how many homes are underwater, more on the question of another housing bubble, how affordable homes are worsens, unemployment claims and more!
US Home Prices Hit Another All Time High
Amidst staggeringly low inventory levels in much of the country during the second quarter, existing-homes sales cooled and home prices maintained their robust level of appreciation, according to the latest quarterly report by the National Association of Realtors®.
The national median existing single-family home price in the second quarter was $269,000, which is up 5.3 percent from the second quarter of 2017 ($255,400) and surpasses last year’s second quarter as the new peak. The median sales price during this year’s first quarter increased 5.7 percent from the first quarter of 2017.
Remember that NAR is talking about the entire country and this does not reflect what is happening in every local real estate market. If you have questions about what is happening in the Anderson area, you can read my Weekly Market Reports or email me!
10% of US Homes Seriously Underwater
From Attom Data Solutions:
In the second quarter of 2018, more than 5.5 million U.S. properties were seriously underwater — where the combined estimated balance of loans secured by the property was at least 25 percent higher than the property’s estimated market value — representing 10.1 percent of all U.S. properties with a mortgage.
Sounds scary BUT this same report also said that 24.5% of US properties with a mortgage are equity rich. This means that 24.5% of properties owe less than 50% of their estimated market value on the mortgage.
Daren Blomquist, senior vice president with ATTOM Data Solutions, said:
Nationwide the number of equity rich homeowners is more than twice the number of seriously underwater homeowners, but the gap between home equity haves and have-nots persists because home price appreciation is certainly not uniform across local markets or even within local markets.
Blomquist mentions how real estate varies from one market to the next and even within a market. This is why people need to rely on a local Realtor when selling a home!
Fannie and Freddie Could Need $78 Billion Bailout
You may have seen me mention the serious need for GSE reform. The GSEs are Fannie Mae and Freddie Mac and since the Dodd-Frank Act was enacted, they are required to conduct annual test of their ability to withstand an economic crisis.
Because of the way that taxpayers are STILL on the hook for the GSEs, reform is needed to protect taxpayers while still ensuring that mortgages are available to credit worthy people.
Easier said than done…
According to the latest test, they could need $78 billion if the housing market/economy hit the skids. While that is not good, it is much better than last years results of almost $100 billion.
No one knows what the future holds and the economy appears to be doing okay today. But we should always hope for the best while planning for the worst!
Is Everything Truly OK with Housing?
I try to share any and all news about housing and the economy, even if it isn’t all sunshine, rainbows and lollipops. Which is different than some real estate “experts” that will always say things are OK…
Consider this snippet from a recent Forbes article by NAR chief economist Lawrence Yun:
Despite the mostly good trends, worries are developing as to whether or not the housing market has peaked and is ready for a slide. How steep and how fast? After all, existing-home sales have fallen every month in June, save one. Additionally, housing starts, traditionally a good leading indicator of potential economic recession, tumbled 12% in June from the prior month. Moreover, many Americans have painful, lingering memories of the home price crash, rising foreclosures, and 10 million net job losses from the housing market bust a decade ago. Naturally, they want to know if there is even a remote possibility of a housing downturn.
Though no one can know the future, the likelihood of a nationwide home price collapse is near nil for the foreseeable future. My forecast over the near term is that housing starts will rise 8% in 2018 and another 8% in 2019. More homebuilding directly leads to higher new home sales, which will rise similarly. Existing home sales will fall 1% in 2018 but then rise 2% in 2019 as more inventory shows up from more homebuilding. The national median home price will rise 5% this year, followed by a more moderate 3% in 2019.
Is Yun correct? Maybe but as he says, no one knows the future! Is he being overly optimistic? Another resounding maybe…
Just yesterday I wrote about how today’s housing market is NOT a bubble but something different. I also think that home sales will fall YoY in 2018 and home prices will not fall but home price growth will slow.
The reason that I think home sales will fall is simply because of the limited supply of affordable homes for sale. It has nothing to do with affordability since mortgage rates are still historically low.
I think that home prices will not fall due to the strong demand. I think that home price growth will slow as we are reaching the end of the recovery from the housing meltdown. This means that home prices will start appreciating at a level closer to the historic norm.
This could change IF the economy hits the skids. Or if inflation takes off. Or if mortgage rates climb to a level that makes home buying more expensive than renting.
There are so many variables that could cause the economy to slow such as trade wars, natural disasters, terrorist attacks, etc etc…
No one knows what the future holds. You just have to look at ALL the data, your finances and goals in life. Then you can decide what is best for you.
I just mentioned how homes are still affordable because mortgage rates are still historically low. However, this is changing according to a report from NAHB:
Rising home prices and interest rates pushed housing affordability to a 10-year low in the second quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released today.
In all, 57.1 percent of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $71,900. This is down from the 61.6 percent of homes sold in the first quarter that were affordable to median-income earners and the lowest reading since mid-2008.
Remain calm and do not panic. Measures of affordability do not always tell you what is possible for you and what is best for you.
That being said, if you are serious about buying a home, waiting or wasting time could prove to be costly.
Weekly Unemployment Claims
In the week ending August 4, the advance figure for seasonally adjusted initial claims was 213,000, a decrease of 6,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 218,000 to 219,000. The 4-week moving average was 214,250, a decrease of 500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 214,500 to 214,750.
A good report! A strong economy and employment numbers will give the Fed more incentive to raise rates in September.
Consumer Comfort Hits 17 Year High!
U.S. consumer sentiment advanced to a 17-year high, elevated by rosier views of the economy and personal finances, the Bloomberg Consumer Comfort Index showed Thursday. Confidence continues to strengthen amid a tight labor market and robust economic growth, with consumers also enjoying tailwinds from tax cuts and lower gas prices.
Excellent news! We can hope that strong consumer sentiment will lead to even more economic expansion for the rest of 2018.
While this is great, I doubt that this will lead to more home sales since the issue of inventory is still hurting home sales. There is plenty of demand from home buyers but sadly, the supply can be limited in some areas/price ranges.
That is all for today! As always, if you have questions about real estate in the Anderson SC area, please contact me!