This is the time of year that I listen to every economist and study statistics to be able to get a handle on what has happened to national and local real estate and what is likely to happen in 2021 so that I can best advise my clients and also structure my focus and business. Yesterday I spent the day on various webinars including Dr. Lawrence Yun, the economist for the National Association of Realtors, and Brian Buffini, the #1 real estate trainer in the world. Both agreed on the resiliency of the housing market going forward. These are trends that will continue for the next several years.
Prices have skyrocketed this year after 3 years of very minor increases. Prices nationally are up 7-8% over last year and locally depending on price point and town between 10-15%! This is NOT a bubble and very different from the collapse of 2007.
- There is no sub prime lending.
- Underwriting guidelines are the tightest they have ever been.
- There is an under supply of building.
- The number of short sales and foreclosures is at a normal level..12% vs 35% in 2007.
- Lack of inventory-down in some towns over 50%.
As of the end of November the number of home sales was down nationally about 3%. We pretty much lost the spring market. However, because of historic sales for the 3rd and 4rth quarter (up 20% year over year) it is predicted that the number of sales will be up 5% by January 1rst. I am feeling that myself as between November 1-December 31 I am anticipating 14 closings personally. Historically this would have been about 6 and I already have 5 scheduled for January.
Jerome Powell, Head of the Federal Reserve, has stated that the rate which they lend to banks will NOT increase at least until 2023. With rates under 3%..I just had 2 loans lock at 2.65%…it is the most affordable time in history to buy. An interesting statistic-the average interest rate from 1972 till now is 8.9%. I always counsel buyers and my team that you live in the payment, not in the price.
There has been a seismic shift in lifestyle. The average distance that people moved up until this year was 7 miles. It is now 1-2 hours away from their previous homes as we have learned the economy of working from home either doing it all of the time or at least 2-3 days a week. I do not believe that this is going to change with the vaccine. Because of this:
- People are upsizing to larger homes as they need space away from kids to work remotely.
- Larger homes are back in vogue. Last year 50% more homes over $1million sold than in 2019.
- People are moving out of the cities because of safety and economy. (decentralization).
- There are more interstate moves than ever as workers can work from any state remotely.
The job recovery has been surprising. In July the unemployment rate was 9.8%. By January it is estimated to be 5.5% and that is even before the vaccine. Full employment is said to be 4% unemployment. This is a significant and ongoing recovery as is evidenced by an almost 3000 point increase in the stock market.
The millennials are FINALLY buying homes. Last year 32% of new homes were bought by millennials. A huge 52% are still living with parents and with home ownership CHEAPER than renting they are purchasing. The shocking thing is that this group is foregoing the traditional starter home or condo and going straight to the larger homes $400,000-$500,000!!!
Finally, prices will continue to rise because rental prices outside of the cities are rising even faster. As of this week there were a total of 19 properties to rent in Danbury. I just listed a small home without a garage at $2400/mo. And got an offer of $2700/mo. While rents in NYC have dropped by 6% they have increased in double digits here and in most suburbs as buyers are trading traffic for chickens.
Yes, eventually we will see inflation but owning real estate is the #1` hedge against that. All economists are predicting an ongoing environment of short inventory, increasing prices and low interest rates until at least 2023.
Now more than ever you need an informed, professional, full time Realtor to help you make your housing decisions. I will be doing more town by town annual statistics next month to share with you. I also have a great 20 page hand out of all of the buying, selling, and housing trends that I will be posting to facebook. If you are interested I can mail or email the hand handout to you directly. Please contact me, Linda McCaffrey, at 203 994-3666 or linda.mccaffrey@cbmoves.com.