October 2018: What’s Ahead for Real Estate?

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What’s Ahead for Real Estate?

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While no one can predict the future with certainty, most experts expect to see modest growth in the U.S. housing market for the remainder of this year and next. The same will most likely be true here in Minnesota as well. Inventory will remain tight, mortgage rates will continue to creep up, and affordability will remain a major issue in many parts of the country.

So what does that mean for home buyers and sellers? To answer that question, let’s take a closer look at some of the top indicators.

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CONTINUED GROWTH IN HOUSING MARKET

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There’s good news for homebuyers! In many markets across the country, prices have begun to stabilize after a period of rapid appreciation. Nationwide, home sales experienced a slight decline of 1.6 percent in the second quarter, primarily due to higher mortgage rates and housing prices combined with limited inventory.

However, buyers who have been waiting on the sidelines in anticipation of a big price drop may be disappointed. Demand remains strong across the housing sector and prices continue to rise. The Case-Shiller U.S. National Home Price Index reported a 6.2 percent annual gain in June, a healthy but sustainable rate of appreciation.1

In its latest Outlook Report, Freddie Mac forecasts continued growth in the housing market due to a strong economy and low unemployment rate, which dropped to 3.9 percent in July.2

“The housing market hit some speed bumps this summer, with many prospective homebuyers slowed by not enough moderately-priced homes for sale and higher home prices and mortgage rates,” according to Sam Khater, Chief Economist at Freddie Mac. “The good news is, the economy and labor market are very healthy right now, and mortgage rates, after surging earlier this year, have stabilized in recent months. These factors should continue to create solid buyer demand, and ultimately an uptick in sales, in most parts of the country in the months ahead.”3

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INVENTORY TO REMAIN TIGHT, NEW CONSTRUCTION MAY HELP[/fusion_title]

Experts predict that demand for housing will continue to outpace available supply, especially in the entry-level price range.

“Today, even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory accompanying unsustainable home-price increase,” said National Association of Realtors (NAR) Chief Economist Lawrence Yun in a recent release.

“The answer is to encourage builders to increase supply, and there is a good probability for solid home sales growth once the supply issue is addressed,” said Yun. Additional inventory will also help contain rapid home price growth and open up the market to prospective homebuyers who are consequently—and increasingly—being priced out. In the end, slower price growth is healthier price growth.”4

With so much demand, why aren’t more builders bringing inventory to the market? According to the National Association of Home Builders, a crackdown on immigration and tariffs on imported lumber have made home construction more difficult and expensive. Those factors—combined with the rising cost of land and increased zoning requirements—have put a damper on the industry overall.5

Still, there’s evidence that a modest rise in the rate of new building projects may be on the way. Freddie Mac predicts new housing construction will increase slightly after a stall last quarter.2 And a recent report by Freedonia Focus Reports forecasts an annual increase in housing starts of 2.4 percent through 2022, led by an uptick in single-family homes.6 The boost in inventory should help drive sales growth and relieve some of the pent-up demand in tight markets.

While the current lack of inventory is generally preferred by sellers because it means less competition, a combination of high prices and rising interest rates has narrowed the pool of potential buyers who can afford to enter the market. Sellers should seek out real estate agents who utilize technologically-advanced marketing tactics to reach qualified buyers in their area.

[fusion_title hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” content_align=”center” size=”2″ font_size=”” line_height=”” letter_spacing=”” margin_top=”” margin_bottom=”” text_color=”” style_type=”single solid” sep_color=””]AFFORDABILITY REACHES LOWEST LEVEL IN A DECADE[/fusion_title]According to a recent report by Morgan Stanley, Americans are paying the most in monthly mortgage payments relative to their incomes since 2008.7 And prices aren’t expected to come down any time soon.

“We believe that the current supply and demand environment will continue to push home prices higher, just at a decelerating pace,” said John Egan, Morgan Stanley’s Co-Head of U.S. Housing Strategy.

Fortunately, economists aren’t concerned about affordability levels triggering another housing crisis, as lending standards are much higher today than they were during the run-up before the recession. According to credit reporting agency TransUnion, the share of homeowners who made mortgage payments more than 60-days past due fell in the second quarter to 1.7 percent, the lowest level since the market crash.7

NAR Chief Economist Lawrence Yun agreed with this assessment in a recent statement. “Over the past 10 years, prudent policy reforms and consumer protections have strengthened lending standards and eliminated loose credit, as evidenced by the higher than normal credit scores of those who are able to obtain a mortgage and near record-low defaults and foreclosures, which contributed to the last recession.”4

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MORTGAGE RATES EXPECTED TO CONTINUE RISING

[/fusion_title]The Federal Reserve has taken measures to help keep the housing market—and the overall economy—from overheating. It has raised interest rates twice this year so far, causing mortgage rates to surge in the first half of the year.

Economists predict that the rise in mortgage rates will continue at a more gradual rate through this year and next. The U.S. weekly average mortgage rate rose from 3.99 percent in the first week of January to as high as 4.66 percent in May. Freddy Mac forecasts an average rate of 4.6 percent for 2018 and 5.1 percent in 2019.2

The good news is, mortgage rates still remain near historic lows and a whopping 14 points below the recorded high of 18.63 percent in the early 1980s.8 Buyers who have been on the fence may want to act soon to lock in an affordable interest rate … before rates climb higher.

“Some consumers may be thinking that because mortgage rates are higher than they were a year ago, maybe I should just wait until rates fall down again,” said NAR’s Chief Economist Lawrence Yun in a recent speech. “Well, they will be waiting forever.”9

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WHAT DOES IT ALL MEAN FOR YOU?[/fusion_title]If you’ve been waiting to buy a home, you may want to act now. A shortage of available homes on the market means prices are likely to keep going up. And a lack of affordable rental inventory means rents are expected to rise, as well.

If you buy now, you will benefit from appreciating property values while locking in an historically-low interest rate on your mortgage. Waiting to buy could mean paying more for your home as prices increase and paying higher interest on your mortgage as rates continue to rise through 2019.

And if you’re in the market to sell your home, there’s no need to wait any longer. Prices have begun to stabilize, and rising interest rates could decrease the number of available buyers for your home. Act now to take advantage of this strong seller’s market.

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If you have specific questions or would like more information about where we see real estate headed in our area, let me know! I’m here to help you navigate this changing real estate landscape.

Sources:
1. S&P Dow Jones Indices Press Release –
https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/766551_cshomeprice-release-0828.pdf?force_download=true
2. Freddie Mac Outlook Report –
http://www.freddiemac.com/research/forecast/20180827_strong_economic_growth.html
3. DSNews –

Freddie Weighs in on Housing Market


4. PR Newswire –
https://www.prnewswire.com/news-releases/realtors-chief-economist-reflects-on-past-recession-whats-ahead-for-housing-300702632.html
5. CNN Money –
https://www.keyt.com/lifestyle/where-is-the-us-housing-market-headed-4-things-you-need-to-know/787471572
6. PR Newswire –
https://www.prnewswire.com/news-releases/us-housing-starts-to-rise-2-4-yearly-to-2022–300711989.html
7. Business Insider –
https://www.businessinsider.com/housing-affordability-slowing-market-sales-2018-8
8. Value Penguin –
https://www.valuepenguin.com/mortgages/historical-mortgage-rates
9. Times Free Press –
https://www.timesfreepress.com/news/business/aroundregion/story/2018/aug/14/despite-prospects-higher-mortgage-rateshousin/476979/

Neighborhoods: Phoenix Mountain Preserve

Roughly along the eastern slopes of the Phoenix Mountain Preserves.

National Geographic names Phoenix one of the “Best Hiking Cities” and with the hillside homes along the Phoenix Mountain Preserve, hiking is an obvious way to spend a beautiful relaxing day. The Phoenix Mountain Preserve includes 19 different options and over 45 miles of trails for hiking, running, biking and horseback riding. This proximity to nature in the heart of the “big city” is a definite highlight of the Phoenix Mountain Preserve properties. Residents are within minutes of the finest resorts, restaurants, shops, theaters and many other amenities. In fact, some of the best restaurants and trendiest bars are within a 10-mile radius.

Residents have easy access to Paradise Valley Country Club where they can play golf, matchup on the tennis court, workout in the private fitness facility, swim laps in the pool or just meet friends for lunch. Camelback Golf Club is just a few miles away and offers 36 holes of championship golf with the beautiful Sonoran Desert as a backdrop.

Clearwater Hills

The exclusive Clearwater Hills community sits along the southeastern slopes of the Phoenix Mountain Preserve and is surrounded by affluent and highly sought-after Paradise Valley. Meticulous desert landscaping and tree-lined streets welcome residents to their custom hillside homes. Breathtaking 360-degree views of the mountains, desert, and city combine with luxury residential amenities to create a quiet, reserved, elegant retreat in Clearwater Hills homes for sale.

Luxury homes in Clearwater Hills are just as spectacular as the area and views. Every home is on a hillside lot with views of the mountain peaks. Most homes are on at least one acre of land and look over the valley, making for fantastic city light views.

Home pricing can start around $800,000 and can go up above $10,000,000. Location, views, house size, finishes, and features all play into the home values. Architecture styles range from mid-century modern to Santa Fe adobe and Mediterranean – no cookie cutter blocks here! Sprawling courtyards, open great rooms, separate guest houses, resort-style private yards, and reclaimed wood flooring are a just a few of the stellar features found in Clearwater Hills homes.

Security is a key amenity in Clearwater Hills offering 24-hour gated security and butler concierge service.

Other Subdivisions

Other subdivisions along the eastern side of the Phoenix Mountain Preserve include Tatum Mountain Estates, Doubletree Canyon, Paradise View, Sunset Hills, Paradise View Estates, Paradise Valley Country Estates, Paradise Del Este, Paradise Hills Estates, Ironwood Hills, Paradise Highlands, Braecrest, Lincoln Heights, Paradise Reserve, and Palm Canyon.

The Phoenix Mountain Preserve homes offer some of the best educational opportunities in Arizona. The community is part of the Scottsdale Unified School District where students can attend Kiva Elementary School, Mohave Middle School, and Saguaro High School. The closest schools to the community are private and highly acclaimed, specifically Phoenix Country Day (pre-kindergarten through 12th grade) and Tesseract School (kindergarten through 10th grade). Several other private, charter and alternative schools are also available in the area.

It’s easy to see what makes the Phoenix Mountain Preserve homes for sale so desirable. From hiking to golf and dining to shopping, residents have everything they need within reach plus miles of mountain views. Its prime location and designer features truly make the Phoenix Mountain Preserve homes an ideal escape right in the heart of the Phoenix.

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