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Relocation buyers are now venturing farther than ever before. Cash buyers have become fierce competitors in the market. The recent relief in home prices seems to be fading away. It's crucial to understand the factors that have the greatest impact on your clients' home search.
Good news awaits the real estate market as the short-lived "housing recession" reaches its end. Lawrence Yun, the chief economist at the National Association of REALTORS®, shared some exciting insights during NAR's quarterly Real Estate Forecast Summit. Bidding wars are back as the demand from homebuyers skyrockets, despite limited inventory. While the number of homes available for sale remains historically low, the desire of Americans to become homeowners remains strong. Yun predicts that home sales will hit their lowest point this year before rebounding next year, but it all depends on mortgage rates taking a dip.
Let's dive into the top trends shaping the housing market, as reported by Yun and Jessica Lautz, NAR's deputy chief economist and vice president of research.
1. Don't buy into the doom-and-gloom headlines. While the housing market is undergoing a correction after the pandemic-driven highs, it doesn't mean we're headed for a long-term slump. Lautz dismisses the notion that prices are bound to drop, pointing out that the data doesn't support such claims. Yes, there might be localized variations in home prices, which can make for sensational news stories. However, the truth is that the sky is not falling.
In fact, NAR data indicates that there are more than three offers for every listing on average, and approximately one-third of homes nationwide are selling above their list price. While distressed sales like foreclosures and short sales have seen a slight increase, they're still at historically low levels and unlikely to surge any further. Lautz explains that homeowners have equity in their properties, so even if they face a major life event, they'll likely have enough equity to cover their mortgage.
2. Americans are now embarking on longer moves. For the past four decades, the average home buyer moved just 10 to 15 miles away from their previous residence. However, things have drastically changed over the last year, with the median distance increasing to 50 miles. In fact, a quarter of buyers relocated more than 470 miles, as per NAR's data. People are moving for a range of reasons, including retirement, proximity to family, affordable housing, and the ability to work remotely.
These captivating insights paint a promising picture for the future of real estate. So buckle up and get ready for the exciting opportunities that lie ahead.
3. Cash buyers are a real force to be reckoned with, making up a whopping 26% of the market. It's quite a jump from before the pandemic, according to Lautz. These buyers, mainly investors and property owners with solid equity, can effortlessly dish out cash for a second home. This poses a challenge for first-time home buyers who typically have smaller down payments, added Lautz.
4. Now let's talk about generational dynamics. The median age of a first-time home buyer is 36 these days, indicating that people are getting into homeownership later in life compared to previous generations. Unfortunately, the lack of affordable housing options is putting a squeeze on young adults trying to enter the market, as Lautz pointed out. These underserved buyers can benefit from FHA and VA loans, which offer lower down payment options, helping them secure their dream home.
In a surprising twist, baby boomers have surpassed millennials as the dominant force in the homebuying realm. They make up a staggering 39% of the market, leaving young adults at 28%, according to NAR data. This has left millennials feeling priced out and often losing out to those cash buyers we mentioned earlier, noted Lautz. Baby boomers, who have accumulated housing wealth over the years, are now eager to move closer to family, find their "forever home," embrace smart home technology, and even live with roommates.
5. But there's some good news. The new-home market is shining bright amidst the challenging real estate landscape. While the existing inventory is at an all-time low, new-home sales are booming, currently accounting for 20% of the market, twice the usual percentage, according to Yun. NAR predicts a healthy upward trend in new-home sales, with a projected rise of 12.3% in 2023 and an additional 13.9% in 2024.
6. Now, let's talk about home prices. It looks like they won't be falling any further. According to Yun, home prices are down about 1% compared to a year ago, with some regional variations. For instance, San Francisco has seen a significant 15% decline in home prices year over year. However, Yun believes that overall, the decline is over. Supporting this, price measurements like the FHFA's House Price Index are starting to show a month-to-month acceleration in home prices. Plus, NAR data indicates that the median sales price for an existing home in June hit a whopping $410,200, the second-highest level in more than two decades.
7. According to Yun, there's hope for a decline in mortgage rates from their current near-7% averages, which have been putting pressure on homebuyers' budgets. However, recent downgrades in the U.S. debt rating by Fitch Ratings could potentially increase borrowing costs. To determine the direction of long-term borrowing costs, Yun emphasized the importance of the Federal Reserve's upcoming decision on short-term interest rates at its late September meeting. If the Fed decides to halt its short-term rate hikes and inflation continues to decrease, Yun speculates that the 30-year fixed-rate mortgage could drop to around 6% by the end of the year.
8. The most critical issue in the housing market is the limited inventory. With high demand from homebuyers, housing supply has reached historically low levels. This is evident in the fact that 76% of homes sold in June were on the market for less than a month, as reported by NAR data. The National Association of Realtors has been advocating for increased efforts from lawmakers to address this supply-demand imbalance.
Find Your Utah Home with Angie Clarke and UT Makes Moves / Keller Williams Realty
If you are looking for the right Utah home, then give Angie Clarke with UT Makes Moves a call. I aim to offer an exceptional relocation experience and unparalleled customer service through prompt communication, ethics and integrity, and the utmost care / concern for my clients!
Angie Clarke with UT Makes Moves is your local Salt Lake City home expert, specializing in working with buyers who are relocating to Utah. Whether you are buying or selling, I'd love the opportunity to make your relocation journey smooth and successful...I strive to provide Relocation Elevated: easing minds, building community, and finding home.
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