Skip to main content
the word

It’s truly hard to believe that it was two years ago that a worldwide pandemic fundamentally changed the world. The housing market was certainly not immune to that. Let’s take some time to answer some of those burning questions about the real estate market.

what's going on with the housing market? price appreciation? supply and demand? home prices? what are the benefits of owning?

Prior to the pandemic, a normal year of home price appreciation was about 3.8%. Corelogic reported this number at 6% in 2020. Really significant. Then last year, we saw more than double the home price appreciation in 2020. Incredible home price appreciation over the past two years. Why? Mostly because of supply and demand – there are more buyers in the market than homes available.

Price Appreciation Is Accelerating % Year-Over-Year Price Increases by Month  Jan 2021 @ 10 Peaking at 19.1 in jan 2022 https://www.corelogic.com/intelligence/u-s-home-price-insights/

Home prices are still accelerating. The most important thing to understand when we hear the experts predict home price “deceleration” is that this means homes will continue to appreciate, but at a slower, more moderate rate. Deceleration does NOT equal depreciation.

Home Price Forecasts for 2022 Average of all experts 6.1%   https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary https://cdn.nar.realtor/sites/default/files/documents/forecast-Q1-2022-us-economic-outlook-01-27-2022.pdf https://www.fanniemae.com/research-and-insights/forecast http://www.freddiemac.com/research/forecast/20220121_quarterly_economic_forecast.page https://pulsenomics.com/surveys/#home-price-expectations https://www.corelogic.com/intelligence/find-stories/corelogic-hpi-posted-record-year-over-year-growth-in-2021/

The average of the 7 expert forecasts for home price appreciation in 2022 is 6.1%. The reality is that if we continue to see low inventory, we will likely see these forecasts trend upward. Six to seven months inventory on the market is the perfect balance of supply and demand. Less inventory is a seller’s market, and more inventory is a buyer’s market.

Tallahaseee new listings: Date New Listings Jan-21 489 Feb-21 507 Mar-21 690 Apr-21 691 May-21 733 Jun-21 749 Jul-21 741 Aug-21 687 Sep-21 578 Oct-21 569 Nov-21 437 Dec-21 395 Jan-22 438  2021https://www.realtor.com/research/data/

New listings in Tallahassee seem to be failing pretty significantly over the past year. With 77% of consumers (according to a recent realtor.com study) feeling like their market is in a housing bubble, it is important now, more than ever, to be informed. So… let’s tackle that perspective.

Inventory of Homes Nothing Like Last Time Months Supply of Existing Homes for Sale in December of Each Year 2007 9.6 2008 9.4  2009 7.3 2010 8.5 2018 3.7 2019 3 2020 1.9  2021 1.8 nar.realtor https://www.nar.realtor/topics/existing-home-sales

Inventory of homes today is nothing like the last time. It was a buyer’s market in the years leading up to the housing crash – we had an oversupply of homes. Today, we are seeing record lows. Inventory is in a totally different place today, and the demand is more than the market can handle.

I want to share this data here that shows, you know, credit scores are nothing like the last time either. This is the volume of loans in billions, with a credit score less than 620. So take a look at those orange bars, 2003 to 2007. Significantly more loans issued to buyers who had a credit score less than 620, than we are now, where we are now. So 2008 to 2021, you can see that those lending standards have gotten much tighter. Meaning that buyers are essentially showing the credentials that they’ll be able to afford their home, and that’s what’s leading to the loan opportunities. So very different lending standards are creating a landscape that’s nothing like the last time. Credit scores are definitely tighter this time around.  https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2021Q3.xlsx

Credit scores are nothing like the last time either, and were, quite frankly, one of the leading causes of the housing bubble. Between 2003 and 2007, significantly more loans were issued to buyers who had a credit score less than 620. Since then, lending standards have gotten much tighter.

38.1 percent of homeowners exiting the forbearance plan are paid in full. So they’ve made their monthly payments or they’ve paid off their loan. They’ve done something to bring their payments current and they’re in a great place, they’re walking away no issue. Now, 43.7 percent are workouts or repayment plans. This is the game-changing section, this is the section we didn’t have the last time around when the housing bubble burst, because these are the homeowners who have been able to make a modification, a loan deferral, to go back to their bank and work with their bank or their lender to change their situation and stay in their homes. This is huge and what we’ve been saying over time is this section is getting a little bit bigger than the green section and that’s because more and more people have been able to go back and work out an alternate plan. That is massive. Now, the percentage of homeowners that are still in trouble are in the orange section, 18.2 percent, but what this does mean is that these homeowners are exiting the plan without a loss mitigation plan, but on the safe side, what we know from Black Knight is that 93 percent of homeowners in the forbearance plan have at least 10 percent equity. So when you have that equity, you also have the opportunity to potentially sell your home rather than go into forbearance. So people sitting in this situation, you know 10 percent is kind of that tipping point of you could sell your house, you could pay off your fees, you could you know maybe even walk away with a little cash in your pocket if you sell your home, and so FEBRUARY 2022 KCM – FEBRUARY 2022 6 of 7 that gives someone a different opportunity than going into forbearance. We have a very strong equity situation across the country right now, enabling that opportunity. https://www.mba.org/news-research-and-resources/newsroom https://www.mba.org/2022-press-releases/january/share-of-mortgage-loans-in-forbearance-decreases-to-141-percent-in-december-2021

Homeowners have significantly more equity today, so they’re in a much better financial situation. In addition, forbearance helped homeowners to the point in which we will not see a wave of foreclosures come to the market.

These are all the wonderful reasons we are not in a housing bubble.

For a $200,000 home at 3.5% interest rate today your monthly payment would be $898. However, in Q1 of 2023 when that same home will be $212,600, interest rates will be $3.8%, and now your monthly payment is $990. That’s a difference of $33,314 over the life of the 30-year mortgage. That’s staggering.

Let’s wrap up this month by touching on net worth and the long-term financial benefits of owning a home. In addition to stability, there is a sense of financial security in homeownership. According to the National Association of Realtors®, the average net worth of a homeowner today is $300,000, while the average net worth of a renter is $8,000. That’s staggering. Again, homes will continue to appreciate in value, allowing buyer’s to take advantage of that equity gain.

While the booming housing market contributed significantly to the recovery of   the U.S. economy, research has consistently shown that homeownership is also associated with multiple economic and social benefits to individual homeowners. Homeownership has always been an important way to build wealth.  National Association of Realtors®

Bottom Line

Home prices are still accelerating, and may continue rising as a direct result of supply and demand. The market data simply does not support that we are in a housing bubble. Despite the rising prices, it is still a good time to buy, since homes are not predicted to depreciate, only appreciate at a slower, more moderate rate.

Tallahassee Market Statistics

Let’s Talk

You’ve got questions and we can’t wait to answer them.

We use cookies and tracking technology in connection with your activities on our website. By viewing and using our website, you consent to our use of cookies and tracking technology in accordance with our Privacy Policy.