Here’s the Fall Snapshot of the housing market that I sent out to my clients recently. The accumulated data give a pretty upbeat view of a fairly stable situation, and after a pretty robust summer, there’s a lot to report.
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It’s been a very robust summer for real estate, and the top news of course is the mortgage rate now sitting around 2.87% for a 30-year fixed. That’s a historic low, and actually lower than some adjustable rates right now. The Fed has said very clearly that it has no intention of raising rates anytime soon.
So it’s a good time to refinance for homeowners sitting in place, and a great opportunity for buyers, who have been showing all summer that they are VERY serious to purchase. The pattern so far has been one of multiple offers with highest-and-best showdowns, cash ruling as king, few contingencies, and short closing times. This is good news for sellers – if we could find any!
Homeowners continue to hold onto their properties, and values continue to appreciate. As we saw in spring, price comes from supply and demand. There’s no indication of distressed property coming to market in any volume, and the numbers suggest no great flood of foreclosures looming. Homeowners in general have good equity positions, and in my opinion they will simply stay in their homes forever and age in place rather than sell below value. So I don’t see any force causing prices to fall.
The overall US economy has contracted of course from the pandemic, but forecasts are edging upward slightly in terms of damage recovery. Winter will show us more – we’re by no means out of the woods yet, but any resilience of the economy can be credited to the strong housing market, as well as the flood of money advanced by the Fed.
Property Values
Home prices continue to rise gradually, as demand far outweighs supply. Inventory is at a historic low currently. NAR’s economist, Lawrence Yun, expects that “with the sizable shift in remote work, current homeowners are looking for larger homes, and this will lead to a secondary level of demand even into 2021.”
New-home sales surged in July by almost 14% as the housing market recovered from its pandemic pause. Builders are active but enthusiasm for multi-family is not surging – the great prize today is single-family rentals, and the pandemic has accentuated this trend. The second quarter saw an uptick in renters wanting houses rather than apartments.
The desire for home ownership is stronger than ever in America today. The second quarter saw ownership increase to a 12-year high of almost 68 percent of the population, and this seems likely to continue. Young adults and minorities are surging into their own homes as rapidly as they can.
Seasons
I’m not sure at the moment if we’re following the usual pattern of “kids back to school” and the market tapering as we go into fall. It’s possible that we may see continued activity through the winter.
The snowbirds from Canada are holding back from visiting Florida this year as the border continues to have restrictions. The Canada-Florida trade relationship is worth around $7 billion so this will impact our local economy, but in terms of housing we get a lot of domestic USA moves from the colder northern states also, and I don’t expect to see these long-planned moves disappear.
The Economy
The national economy remains unclear. Almost 4 out of 5 Americans report current job security, and their picture is one of unchanged and even increased income this year. The shutdowns killed sections of the economy, but also kept more discretionary spending in the home – almost $1.3 trillion extra has remained in checking accounts during the last six months.
Almost half of the population is saving more currently, or paying down debt with unspent income. Homeowners continue to regard their equity as their true bottom line, and the stability of home values and the market right now is quite certainly due to most homeowners having significant equity, with only a small proportion underwater.
Landlord and tenant remain a troubled and uncertain area. Millions of renters overnight lost jobs that may never be replaced. The latest study from Apartment List expects 9 out of 10 renters to pay their September rent by the end of the month, and this is better than expected – perhaps from a sad truth that many renters with no resources have now moved out into shared accommodations.
More than 40% of rental units across the nation are owned by individual “mom & pop” owners, and with the renter crisis and the restrictions on short-term rentals, many small investments were placed in jeopardy. How all this will ultimately settle is not yet clear and it may be January before we can assess the total impact. NAR by the way is currently lobbying the government to offer some kind of help in this area.
Lending
Credit is tight as lenders tighten standards, and as government sources divert temporarily away from consumer markets. Even so, according to the Mortgage Bankers Association, home lending and refinancing will be higher for 2020 than we’ve seen for at least fifteen years.
Much of the lending is going to investment and rental properties, and while some lenders will now charge a refinancing fee for homeowners, this seems unlikely for multi-family properties. Fannie and Freddie expect almost as much lending to apartments this year as last year.
Even with historic low rates, for those considering refinance the closing costs may or may not be worth it, especially for those closer to the end of the loan term. These are numbers to crunch diligently – and feel free to call me if you want some help.
Lifestyle Trends
The pandemic has shifted a lot of thinking on how to use a home, and where it should be located. It remains to be seen how permanent many of these trends will become.
In general, there’s increased desire to head for the suburbs or even the country as remote working increases. The National Association of Home Builders reports a clear uptick in Q2 and says “The growing trend for working at home is enabling more families to choose to live in lower cost, lower density communities.”
People are rethinking the layout of a home, moving away from open-plan and back to having more walls, specifically to segregate people – making separate spaces for the working parent and the home-schooling child, for example. The demand for prefabricated sheds for the back yard increased 400% this summer, as home dwellers seek better ways to have a functional home office.
One other factor influencing home styles and choices may also be that homeowners have spent a lot of time indoors this year, with many living in their homes as never before. This has changed many habits, spurring some to take up new outdoor activities, and to think about growing their own food, or even moving to a farm. Demand is surging for new home amenities such as play spaces and pools, and spending from refinanced or saved money is going on a wave of home improvements.
And finally, Tripadvisor’s recent analysis of reviews shows that Florida holds ten out of the top fifteen beaches in the USA. So, some things are not changing.
© Stephanie Passman
