Discussing the latest US home price report from CoreLogic and looking at home prices in Anderson County, several reasons why we are not in another housing bubble, the changes from the Great Recession go beyond statistics, a possible cure for the lack of affordable homes plus more!
US Home Prices Increase 6.8%
Home prices increased nationally by 6.8 percent year over year from June 2017 to June 2018. On a month-over-month basis, prices increased by 0.7 percent in June 2018 compared with May 2018, according to the CoreLogic HPI.
Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 5.1 percent on a year-over-year basis from June 2018 to June 2019.
Dr. Frank Nothaft, chief economist for CoreLogic, said:
The rise in home prices and interest rates over the past year have eroded affordability and are beginning to slow existing home sales in some markets. Further increases in home prices and mortgage rates over the next year will likely dampen sales and home-price growth.
As I always caution you, this is a national report and does not reflect what is happening in every local real estate market. Let’s look at what has happened in Anderson County SC by looking at data from the WUAR MLS for the months of June 2018, May 2018 and June 2017:
You can see if we compare the data for June 2018 and June 2017 that home prices have increased while the time to sell and the number of homes sold have decreased. Which sounds eerily similar to what Nothaft from CoreLogic is predicting…
But even this data for Anderson County could mislead you since it is about ALL of the homes sold during one month. You know that there are may different types of homes and price ranges in Anderson County so you must compare apples to apples…
Not a Bubble But Something Different?
In cities nationwide, home prices are at or above their pre-recession levels. But it’s no bubble.
Nationwide, the price for homes is approaching the zenith seen in 2006, just before the market fell into a foreclosure crisis and the economy sank into the Great Recession.
But there are key differences between the housing peak in 2006 and the housing peak today. This surge in housing prices is not necessarily evidence for a bubble—much less any indication that a bubble is about to burst. Understanding the difference is critical to knowing how high housing costs may affect the economy going forward.
One difference is that home prices have been rising faster than wages. And this is unsustainable…
The 2nd difference is the lack of speculation that we saw in the last housing bubble according to CityLab. While we are seeing people flipping homes, it is not at the level we saw before the housing market crashed.
Another difference is that the number of new homes being built is lower than the last housing bubble. Which is strange considering the strong demand from home buyers…
Plus there are 2 other compelling reasons why we are not in a housing bubble:
- Home Prices Adjusted for Inflation
- Mortgage Lending Standards
Home prices are higher than before the housing market crashed. BUT if we adjust prices for inflation, home prices would be MUCH higher!
According to CoreLogic, the inflation-adjusted U.S. median sale price in June 2006 was $247,110 (or $199,899 in 2006 dollars), compared with $213,400 in March 2018.
And in case you missed yesterday’s post, I shared how lending standards are not anything like they were before the housing market crashed. It is getting easier to get a mortgage but we are not seeing the high risk lending that lead to the market crashing!
We are not seeing another housing bubble but something different: high demand, low inventory and plenty of frustration for home buyers in some areas/price ranges.
The only way to deal with this situation is to work with a local experienced Realtor to ensure your home buying success!
10 Years Later
From NY Mag:
Sometimes you don’t know how deep the hole is until you try to fill it. In 2009, staring down what looked to anyone with a calculator like the biggest financial crisis since 1929, the federal government poured $830 billion into the economy — a spending stimulus bigger, by some measures, than the entire New Deal — and the country barely noticed.
It registered the crisis, though. A decade now after the beginning of what has come to be called the Great Recession, and almost as long since economic growth began to tick upward and unemployment downward, the cultural and psychological imprint left by the financial crisis looks as profound as the ones left by the calamity that struck our grandparents. All the more when you look beyond the narrow economic data: at a new radical politics on both left and right; at a strident, ideological pop culture obsessed with various apocalypses; at an internet powered by envy, strife, and endless entrepreneurial hustle; at opiates and suicides and low birthrates; and at the resentment, racial and gendered and otherwise, by those who felt especially left behind. Here, we cast a look back, and tried to take a seismic reading of the financial earthquake and its aftershocks, including those that still jolt us today.
The mood in America is arguably as dark as it has ever been in the modern era. The birthrate is at a record low, and the suicide rate is at a 30-year high; mass shootings and opioid overdoses are ubiquitous. In the aftermath of 9/11, the initial shock and horror soon gave way to a semblance of national unity in support of a president whose electoral legitimacy had been bitterly contested only a year earlier. Today’s America is instead marked by fear and despair more akin to what followed the crash of 1929, when unprecedented millions of Americans lost their jobs and homes after the implosion of businesses ranging in scale from big banks to family farms.
It is completely understandable if people feel differently now compared to before the Great Recession. There have been many big changes that cause all of us to look at things differently.
But that does not mean we have to live in fear or ignorance. There are steps each of us can take to achieve the life we want and deserve.
It may not be easy and it probably won’t happen overnight. It will take work, planning, sacrifice and time…
If previous generations of Americans were able to recover from the Great Depression, then it is possible for all of us to do the same.
A Possible Cure for the Lack of Affordable Homes?
From the NAR:
Manufactured homes are an affordable option, especially for the lower income groups. Based on 2016 latest data, the median household income among manufactured homeowners was $43,900, about half the median household income among all homeowners. The median household income of manufactured homeowners is about the same as the median income of all renters, at $42,500. This indicates that renters can transition to homeownership without significant change in housing expenses via ownership of a manufactured home, if other factors that homebuyers look for are also met (e.g., accessible transportation, presence of a good school, other neighborhood qualities).
This is very true BUT this article points out that the manufactured home must be detitled and attached to the land to reap the most rewards:
The analysis shows that households will be financially better off owning a manufactured home on one’s own land and obtaining mortgage financing for the real property (house and lot). However, most manufactured home owners do not title their property as real property. Although 68 percent of manufactured homes were sited on private property (32 percent in communities)— which could enable them to be titled as real property and hence eligible for mortgage financing— only 17 percent were titled as real property. One reason is that manufactured homes are titled as personal property by default and homeowners must file for conversion of the chattel as a real property, and it appears that most manufactured homeowners do not opt to convert for a variety of reasons, perhaps relating to the perceived difficulties about the conversion process, or because they do not want to pay the higher property tax rates. More survey-based research on this area is needed to understand why manufactured homeowners don’t choose to convert their personal property into a real property.
Boom! There you have it in black and white! Exactly what I have preached for years and years about buying/owning a manufactured or mobile home. The home MUST have a FHA-able foundation and be detitled and attached to the land.
Failing to do this means the owners will face difficulty if they want to sell or use the equity in their home later on. And according to NAR’s analysis, it dramatically affects the value of the property.
Most Buyers Can’t Afford the Homes for Sale in Their Area
Speaking of the lack of affordable homes, consider this interesting tidbit from the NAHB:
Affordability is a serious issue for prospective home buyers (adults planning a home purchase within a year). In the second quarter of 2018, they were asked to estimate the share of all homes available for-sale in their markets that was affordable to them. The majority (77%) said they can afford fewer than half the homes for-sale in their areas, down from the 83% who answered similarly in the first quarter of 2018. This means that only a small minority of potential buyers, 22% to be precise, can afford the majority of homes available in their area, up slightly from the share a quarter earlier (17%).
The good news is that this is improving. The fierce competition for affordable homes means buyers must be prepared and using a Realtor as a Buyers Agent!
Secretary of Commerce and Grifting?
If even half of the accusations are legitimate, the current United States secretary of commerce could rank among the biggest grifters in American history.
A multimillion-dollar lawsuit has been quietly making its way through the New York State court system over the last three years, pitting a private equity manager named David Storper against his former boss: Secretary of Commerce Wilbur Ross. The pair worked side by side for more than a decade, eventually at the firm, WL Ross & Co.—where, Storper later alleged, Ross stole his interests in a private equity fund, transferred them to himself, then tried to cover it up with bogus paperwork. Two weeks ago, just before the start of a trial with $4 million on the line, Ross and Storper agreed to a confidential settlement, whose existence has never been reported and whose terms remain secret.
This is just the tip of the iceberg and the investigation of Ross by Forbes uncovered much more. This article makes me wonder why Trump would select someone like Ross?
It does make you think…
Well that is it for today! Be sure to hit those share buttons and as always, if you have any questions about real estate in the Anderson SC area, email me!