Monthly Archives: October 2022

Why Today’s Housing Market Isn’t Like 2008

With another uptick in mortgage interest rates and all the media talk about a shift in the housing market, you might be thinking we’ve entered a housing bubble. But the good news is, that there’s concrete data to show why this is nothing like the last time.

There’s Still a Shortage of Homes on the Market Today, Not a Surplus

For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to almost 15 years of underbuilding.

The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just a 3.2-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines.

3 Graphs Showing Why Today’s Housing Market Isn’t Like 2008 | MyKCM

On Cape Cod, there is a little over a two month’s supply of homes. While this is certainly an increase over past months, it’s not would be considered a normal market. So, with demand still strong and inventory tight, prices will remain steady. Decreases will come on a house-by-house basis determined by the initial asking price, condition, competition, buyer interest, etc.

Mortgage Standards Were Much More Relaxed Back Then

During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home.

Back then, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. (Mari recalls going to closings where buyers signed paperwork for three loans!)

Today, things are different, and purchasers face much higher standards from mortgage companies.

The graph below uses Mortgage Credit Availability Index (MCAI) data from the Mortgage Bankers Association (MBA) to help tell this story. In that index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is. In the latest report, the index fell by 5.4%, indicating standards are tightening.

3 Graphs Showing Why Today’s Housing Market Isn’t Like 2008 | MyKCM

This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards over the past 14 years have helped prevent a scenario that would lead to a wave of foreclosures like the last time.

The Foreclosure Volume Is Nothing Like It Was During the Crash

Another difference is the number of homeowners that were facing foreclosure after the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM Data Solutions to help paint the picture of how different things are this time:

3 Graphs Showing Why Today’s Housing Market Isn’t Like 2008 | MyKCM

Not to mention, homeowners today have options they just didn’t have in the housing crisis when so many people owed more on their mortgages than their homes were worth. Today, many homeowners are equity rich. That equity comes, in large part, from the way home prices have appreciated over time. According to CoreLogic: “the total average equity per borrowers has now reached almost $300,000, the highest in the data series.”

Rick Sharga, Executive VP of Market Intelligence at ATTOM Dataexplains the impact this has: “very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”

This shows that homeowners are in a completely different position this time. For those facing challenges today, many have the option to use their equity to sell their house and avoid the foreclosure process.

Bottom Line

So, if you’re concerned that the same decisions that led to the last housing crash are being made again, this information should help alleviate your fears. Concrete data and expert insights clearly show why this is nothing like the last time.

If you have questions and concerns, please let’s connect at 508-360-5664 or msennott@todayrealestate.com. We’re in touch with experts not only on Cape, but across the country. We’ll give you honest answers and help guide you to the best decisions for you and your family.

Please be careful tonight as trick or treaters will be out at the same time as many of us are coming home work. They’re not always easy to see, so please be careful, especially on dark streets.

Let’s make it a Happy Halloween.

Mari and Hank

What’s Next for Home Prices

As the housing market cools in response to the rise in mortgage rates, home price appreciation is slowing as well. If you’re following the headlines in the media, you’re probably seeing a wide range of opinions calling for everything from falling home prices to ongoing appreciation. 

But what’s true? What’s most likely to happen moving forward?

While opinions differ, the most likely outcome is we’ll fall somewhere in the middle of slight appreciation and slight depreciation. Here’s a look at the latest expert projections, so you have the best information available today.

What the Experts Are Saying About Home Prices Next Year

The graph below shows the most up-to-date forecasts from five experts in the housing industry. These are the experts that have most recently updated their projections based on current market trends:

What’s Ahead for Home Prices? | MyKCM

As the graph shows, the three blue bars represent experts calling for ongoing home price appreciation, just at a more moderate rate than recent years. The red bars on the graph are experts calling for home price depreciation.

While there isn’t a clear consensus, if you take the average (shown in green) of all five of these forecasts, the most likely outcome is, nationally, home price appreciation will be fairly flat next year.

What Does This Mean?

Basically, experts are divided on what’s ahead for 2023. Home prices will likely depreciate slightly in some markets and will continue to gain ground in others. It all depends on the conditions in your local market, like how overheated that market was in recent years, current inventory levels, buyer demand, and more.

Prices vary from market-to-market and parts of the country. We’re friendly with colleagues in our business from across the country and watch them market homes for $450,000.00, for example, that would fetch $650,00.00 or more here.

What’s not going to happen is a dramatic drop in prices that some buyers are waiting for. No reputable expert is predicting the “crash” that would allow that to occur.

The good news is home prices are expected to return to more normal levels of appreciation rather quickly. The latest forecast from Wells Fargo shows that, while they feel prices could drop slightly in 2023, they also think prices will recover and net positive in 2024. That forecast calls for 3.1% appreciation in 2024, which is a number much more in line with the long-term average of 4% annual appreciation.

And the Home Price Expectation Survey (HPES) from Pulsenomics, a poll of over one hundred industry experts, also calls for ongoing appreciation of roughly 2.6 to 4% from 2024-2026. This goes to show, even if prices decline slightly next year, it’s not expected to be a lasting trend.

As Jason Lewris, Co-Founder and Chief Data Officer for Parcl, says: “In the absence of trustworthy, up-to-date information, real estate decisions are increasingly driven by fear, uncertainty and doubt.”:

As “Prof Hank” explained in a recent video posted to our YouTube channel, the media is not your best source of information.

So, don’t let fear, uncertainty or misinformation change your plans. If you’re unsure about where prices are headed or how to make sense of what’s going on in today’s housing market, let’s connect.

Please consider subscribing to our YouTube channel where we post up-to–date information for buyers and sellers that is pertinent to where we live. Or let’s chat at 508-360-5664 or msennott@todayrealerstate.com.

As we’ve mentioned before, we sold and bought earlier this year, so we had many of the same questions and concerns as homeowners as you might have. We’re happy to share with you what we learned as homeowners, as well as our perspective as real estate professionals.

Let’s talk soon…

Mari and Hank

What Actually Determines Your Mortgage Rate

There’s lots of commentary about impact when the Federal Reserve raises the federal funds rate. (That’s the amount banks charge each other for short term loans.)

Even though the rate has very little to do with mortgage interest, it often becomes a point for discussion, which can illustrate how much he “experts” actually don’t know about the subject.

So, here are the four items that do impact your mortgage interest rate.

Your Credit Score

Credit scores can play a big role in your mortgage rate. Freddie Mac explains: “When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.”

That’s why it’s important to maintain a good credit score. If you want to focus on improving yours, a trusted financial advisor can give you expert advice.

Your Loan Type

There are many types of loans, each offering different terms for qualified buyers. The Consumer Financial Protection Bureau (CFPB) says: “There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”

When working with your real estate advisor, make sure you know which types of loans you may qualify for as it may influence the kind of property you can purchase.

Your Loan Term

Another factor to consider is the term of your loan. Just like with location and loan types, you have options. Freddie Mac says: “When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”

Depending on your situation, the length of your loan can also change your mortgage rate.

Your Down Payment

If you’re a current homeowner looking to sell and make a move, then you can use the home equity you’ve built over time toward the down payment on your next home. The CFPB explains: In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.”

To learn more, connect with a lender to find out the difference a higher down payment can make for your new mortgage.

Bottom Line

These are the major factors that can help determine your mortgage rate, if you’re buying a home. It’s important to work with a reputable lender, who can pre-approve you and give you honest advice about interest rates now and what can be expected in the future.

If you are looking for a lender, we work with several, who we can highly recommend. Let’s connect at 508-360-5664 or msennott@todayrealestate.com and we’ll pass along their contact information.

Knowing what you can afford then helps us locate the homes that fit your budget. And we’ll be sure that you stay in touch with your lender in case a rate change impacts what you can afford.

Let’s talk soon…

Mari and Hank

Questions Homebuyers Should Be Asking Right Now

The increase in interest rates has started to slow the overheated housing market as potential monthly mortgage payments have pushed — at least temporarily — some buyers to the sidelines. This is leaving some people, who want to purchase a home or sell their current one, wondering if now is really the right time.

If this sounds like you, here are two questions you should be asking yourself.

1. Where Do I Think Home Prices Are Heading?

There are two places to turn for answers to this question. If you look at what experts are projecting for home prices in 2023, they’re forecasting home price appreciation around 2%. While it’s true that a few are calling for depreciation, most are calling for appreciation in home values over the next year.

The second spot to turn to for information is the Home Price Expectation Survey from Pulsenomics – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists. According to the latest release, the experts surveyed are also calling for home price appreciation for the next several years (see graph below):

Two Questions Every Homebuyer Should Ask Themselves Right Now | MyKCM

2. Where Do I Think Interest Rates Are Heading?

Most experts see mortgage rates rising over the next several months. According to Mark Fleming, Chief Economist at First American: “While mortgage rates are expected to continue to drift higher over the coming months, much of the rapid increase in rates is likely behind us.”

To date, we’ve seen mortgage interest rates generate head-line grabbing increases only to inch back with little or no fanfare. It’s important to remember that mortgage rates remain lower than they have in years, and while they won’t return to historical lows, rates also won’t spike to the historic highs of the late 90s.

Buyers should keep in close contact with their lenders to stay up-to-date on what they can afford.

If you’re thinking about buying a home, asking yourself about prices and mortgage rates will help you make a powerful and confident decision. The alternative is renting, but they’re also increasing and are often higher than what your mortgage could be. That may mean buying a home makes more sense. And don’t forget that when you rent, you’re really just paying your landlord’s mortgage. So, you might as well pay your own.

Questions? We’re happy to sit down with you and review your options. We can also put you in touch with qualified lenders, who can discuss with you financial options. It’s important that you speak with experts in order to make an informed decision and not your Mother’s cousin Gretchen, who sold a few houses 20 years ago.

So, let’s connect at 508-360-5664 or msennott@todayrealestate.com. Let’s talk soon…

Mari and Hank

Consider Condos as Part of Your Home Search

When looking to make their move, many buyers don’t consider purchasing a condominium as an option.

Overall, housing supply is still low. So, if you need more choices, expanding your search by adding additional housing types, like condos, could help.

Exploring Condos Could Add Options That Fit Your Budget

While condominiums generally differ from single-family homes in average space and floorplans, that size difference is one reason why they can be a more affordable option. According to a recent report from realtor.com, condo buyers paid roughly 7% less for their home than buyers of other housing types last year. With rising mortgage rates and home prices, the relative affordability of a condo could be worth considering.

Remember, your first home doesn’t have to be your forever home. The important thing is to get your foot in the door as a homeowner. Buying a condo now can springboard you into a bigger home later on.

An article from the Urban Institute explains: “Because condos…are generally more affordable, they tend to help first-time homebuyers step onto the first rung of the homeownership ladder. These buyers often use the equity in their condo to then purchase a larger, single-family home.”

In other words, owning a condo will help you start building wealth in the form of home equity. In time, the equity you build can fuel a future purchase should you decide you want to buy a new home.

Condo Living Provides Several Great Perks

Boosting the number of options during your home search is just one reason to consider condos, but there are several other benefits to condo living.

First, they tend to require minimal upkeep and lower maintenance. A recent article from Bankrate highlights this, saying: “…if the roof is leaking or the carpet in the lobby needs to be replaced, that’s not your responsibility – the condo association handles those duties.”

The association also is responsible for outside maintenance, snow removal, parking lot and road repair, etc. relieving owners of many traditional home upkeep costs. This should increase the opportunity to save money for the next move.

Condos often have amenities like swimming pools, tennis courts, and walking/biking trails that first time home buyers can only dream about. Many are also conveniently located near restaurants, shopping and highway access.

Too often condos are seen as options only for younger buyers without children or those looking to downsize. That’s simply not the case. Our new condo is 1,300 sq. ft. — just 300 sq.ft. less than our three bedroom, two bath Cape where we lived for 28 years. The 300 sq. ft. difference easily represents the living space we weren’t using. (And we have a full basement that we could finish if we needed additional living space.)

When living in a condo, you do have to factor in the monthly HOA (Homeowners Association) fee. You need to compare the amount with the benefits and amenities that the property has. In our situation, we concluded the HOA was worth it considering what the complex offered.

Ultimately, owning and living in a condo can be a lifestyle choice. If that appeals to you, condominiums can give you the added opportunities you need when looking for your your first home.

Curious about how condos can help you meet your homeownership goal? Let’s connect at 508-360-5664 or msennott@todayrealestate.com to start reviewing your options.

…and BTW, we’re not limited anymore to assisting our clients and friends on Cape Cod. Over the last several months, Today Real Estate has expanded its footprint and we now have an office in Norton, which will allow us to work with our long time friends and acquaintances in the Attleboro area.

Talk soon….

Mari and Hank