Chicago Real Estate News

 

June 15, 2021

Home Price Appreciation Is as Simple as Supply and Demand

 

 

Home price appreciation continues to accelerate. Today, prices are driven by the simple concept of supply and demand. Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.

Let’s use three maps to show how this theory continues to affect the residential real estate market.

Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:Home Price Appreciation Is as Simple as Supply and Demand | Keeping Current MattersAs the map shows, certain states (colored in red) have appreciated well above the national average of 12.6%.

Map #2 – The change in state-by-state inventory levels year-over-year reported by realtor.com:Home Price Appreciation Is as Simple as Supply and Demand | Keeping Current MattersComparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Idaho, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one of causation.

The reason prices continue to accelerate is that housing inventory is still at all-time lows while demand remains high. However, this may be changing.

Is there relief around the corner?

The report by realtor.com also shows the monthly change in inventory for each state.

Map #3 – State-by-state changes in inventory levels month-over-month reported by realtor.com:Home Price Appreciation Is as Simple as Supply and Demand | Keeping Current MattersAs the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month. This may be evidence that homeowners who have been afraid to let buyers in their homes during the pandemic are now putting their houses on the market.

We’ll know for certain as we move through the rest of the year.

Bottom Line

Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels.

 

By: KCM

June 9, 2021

Tips for going back to the office

 

For some, the days of working from home are on the way out or becoming less frequent as more people get vaccinated. If this includes you, then you know how exciting it is to see your favorite coworkers again and collaborate in person. And while you may have certain concerns about going back into the office, the best thing you can do is plan ahead, and make sure you’re aware of any new workplace policies related to masks, schedules, quarantining, and workspace configuration.

 

Make the transition back to work as easy as possible by following these tips:

Spruce Up Your Workspace

If you haven’t been in the office since March 2020, it’s worth noting that things at your desk may have gotten a little, well, dusty. Bring in some disinfectant wipes, dust off those desk items, and show your workspace a little love. After you clean up your workspace, consider adding any items that will provide a sense of comfort, whether that’s some new framed photos, a plant, seat cushion, blanket, or maybe even a diffuser.

Do a Test Run

If possible, try working in the office for a day or two before everyone else makes their return. This will give you a chance to adjust, and will also give you an idea of commute times. Public transit times may have changed over the last year, so it’s important to time your morning accordingly. If you’re driving, leave earlier than usual just to be safe. Pro tip: queue up some new podcasts, audiobooks, or playlists to add some entertainment and stress relief to your morning!

Dress the Part

It may be time to retire those sweatpants. If your work-from-home attire isn’t exactly appropriate for the office, start dressing the part before you head back to ease the transition. Now also may be a good time to treat yourself to new work clothes that will help you get back into the routine of things. Plus, who doesn’t love a shopping spree?

Adjust Alarms

Whether you’ve used the extra time in the mornings to work out or sleep in, you’ll need to readjust your routine to account for your commute. Establish a sleep schedule that gets you your recommended 6-8 hours, and try out those earlier alarms in the days leading up to your first day back.

Prepare Your Pets

If you have a pet, it’s most likely gotten used to having you around. Help them adjust to your return to work by leaving the home more frequently and for longer periods of time. The goal is to get them into a routine that closely resembles your pre-pandemic lifestyle.

Don’t Forget Your New Habits

Life at home has certainly put a lot into perspective. Perhaps you started exercising regularly or picked up a new cooking hobby. Maybe you joined a virtual book club or learned how to knit. Regardless of what you’ve added to your routine, make it a priority to continue taking time for yourself. And while you adjust, be patient with yourself and others as you make the return back to the “new” new normal.

June 2, 2021

Over half of buyers are going above asking price

 

More than half of homes (51%) have sold above their listing price in the four week period ending May 23, 2021 — up from 26% one year ago, according to a recent study by Redfin.

The Redfin study looked at homes sold in 400 U.S. metros.

Numerous other sales records were also set, including the median home sale price ($354,250) and number of days on the market (17, down from 36 one year ago). Asking prices also reached an average of $361,875, another record high.

Diving deeper, for the two week period ending May 9, 2021, 57% of homes that went under contract had an accepted offer within the first two weeks on the market.

“We are seeing a typical late-spring slowdown in new listings and pending sales, but prices don’t typically peak until late August, and their growth remains completely unhinged,” said Daryl Fairweather, Redfin’s chief economist. “The fact that homes keep selling for more and more above asking prices goes to show that many more people want a home than there are homes for sale. I don’t see that changing until mortgage rates increase, which will likely happen later this year. But until then, the housing market will remain red-hot.”


How real estate agents can alleviate consumer pain points in a tight market

The severe lack of inventory in today’s housing market has been a source of stress for home buyers and real estate agents alike. HousingWire sat down with Realtor.com CEO David Doctorow to learn how agents and brokers can alleviate some of the frustrations their clients are facing.

Presented by: Move Sales

For the week ending May 21, purchase applications increased 2% over the prior week. For the week ending May 27, 30-year mortgage rates fell slightly to 2.95%

Redfin also studied housing numbers from the same period in 2019, before the onset of the COVID-19 pandemic in the U.S. The study found that active listings — the number of homes listed for sale at any point during the period — are down 49% from the same period in 2019.

These numbers illustrate the severe lack of inventory, which has driven existing home prices up all over the country. But that’s not slowing down buyers.

Regionally, the only metro area out of the 400 Redfin studied that saw home sales decline year over year was Rochester, New York (-3%). The largest gains in sales were in places that had the most abrupt slowdown of home sales in the spring of 2020, including San Francisco (up 184%), San Jose (up 150%), and Miami (up 120%).

Median home prices also increased from a year earlier in all metro areas Redfin tracks. The smallest increase was in Honolulu, Hawaii, where prices went up 0.2% from a year ago. The largest home price increases were in Austin (up 42%), Oxnard, California (up 26%) and Miami (up 26%).

 

By 

May 26, 2021

Rising home prices but no housing crash in sight

The most recent jobs report looks good for housing and the end of forbearance

 

HW+ row of houses

The key to the U.S. getting back on track economically is for its citizens to freely walk the earth again without the existential threat of COVID-19. The U.S. is getting closer and closer to meeting that goal, while other countries are still trying to control the virus. Before the successful vaccination program, I targeted Aug. 31, 2021, as the launching point for when we can fully achieve this, with the mindset that all jobs lost to COVID would be back online by September 2022 or earlier. Despite the last sub-par jobs report, we are currently on track to satisfy that prediction as we should be able to walk the earth freely before the end of August. This is the furthest thing from a housing crash that we could expect.

In February 2020, we had 152,523,000 nonfarm payroll workers, which isn’t all the workers in America, but most of them. Today, in May 2021, we have 144,308,000 nonfarm payroll folks working.

In the previous expansion, which was the longest economic and job expansion in history, the  all-time high for job openings was 7,574,000. Today we have roughly 7,367,000 job openings and that number should get to 10 million by the end of this new expansion. As you can see with the chart below, not only has the housing data performed much better during this crisis, but job openings are roughly 5.5 million higher today than the worst levels of the great financial crisis.

We do have a pathway to get back to the employment numbers we had in February 2020 prior to COVID-19, but until that happens (September 2022 or earlier) don’t expect the Federal Reserve to hike the federal funds rate anytime soon. We will most likely need to see the employment to population ratio for prime-age workers get back to 80% before that happens. That metric is currently at 76.9% and tends to be sticky.

May 19, 2021

Mortgage Rate Forecast

Mortgage rates forecast for June 2021

Mortgage rates could stay close to 3% in June, as they’ve done this spring.

But when it comes to overall trends, we’re far more likely to see a steady increase in rates than any substantial drop.

Some agencies predict rates as high as 3.5% or 3.6% by the end of summer. Others think we’ll see a more modest increase to around 3.3% in the same time frame.

Though exact forecasts vary, the consensus is for higher rates in the near future.

Locking a rate soon could secure you a great deal, while waiting on further drops is risky.

Mortgage rates forecast next 90 days

Mortgage rates are closely tied to the health of the U.S. economy. And the country as whole is on an upswing, which should lead to higher rates in June and the coming months.

Chart showing 30-year mortgage rate predictions for the next 90 days, from June 2021 through August 2021 rate

However, recovery has been a bit uneven.

Some indicators, like the inflation rate, are soaring. Others, like the current employment situation, are off to a rockier start than expected.

Mortgage rates could continue to fluctuate as a result.

But while some weeks might bring dips and others spikes, expect to see an overall upward trend as 2021 progresses.

Tim Lucas, Mortgage Reports Editor

May 12, 2021

Stop searching "Housing Crash"

 

 

Last week CNBC published a story that sought to answer why searches for “housing crash” had gone up 2,450% in the past month. This search term is something that has brought readers to HousingWire for years, and it’s always surprising, but maybe it shouldn’t be. After all, housing demand is very high and inventory is really low, so we’re seeing bidding wars, appraisal gaps and really steep home prices all over the country.

 

If you aren’t in the business day to day, all those factors could seem scary. Heck, even if you are in the business you could wonder what it all means.

 

But Lead Analyst Logan Mohtashami says not to worry, the housing market is not going to crash. And — as usual — he has loads of charts and data to back up his opinion.

 

“This story is more about low inventory than speculative demand,” Mohtashami writes. “Inventory is abnormally low when housing demographics are solid; we have low mortgage rates and some make-up demand for opportunities lost in 2020 during the COVID-19 shutdowns. However, we don’t have anything that looks like the speculative credit bubble we saw from the years 2002-2005.” 

 

Read Mohtashami’s article here and share with clients, friends and family so they can stop losing sleep googling housing crash and go back to scrolling baby goats and this beaver who is being rehabbed in a person’s house. 

 

Sarah Wheeler HW - EIC

May 5, 2021

This is not a bubble. It is simply lack of supply.

 

It's a discouraging scene: Bidding wars, soaring prices, and fears that homeownership is becoming out of reach for millions of Americans. We're in a housing frenzy, driven by a massive shortage of inventory — and no one seems to be happy about it.

Why it matters: Not all bubbles burst. Real estate, in particular, tends to rise in value much more easily than it falls. Besides, says National Association of Realtors chief economist Lawrence Yun, this "is not a bubble. It is simply lack of supply."

 

By the numbers: America has a record-low number of homes available for sale — just 1.03 million, according to the latest NAR data. That compares to a peak of more than 4 million at the height of the last housing bubble, in July 2007.

  • The total number of active listings this week is down a record 54% from the same week a year ago, per Realtor.com. That in turn has helped to drive national prices up 17.2% over last year.

  • Almost half of homes now sell within one week of being listed, per Redfin.

  • In Austin, Texas, the median listing price has risen 40% in one year to $520,000.

The big picture: Prices are being driven upwards by a combination of factors, including continued low mortgage rates, a pandemic-era construction slowdown, a desire for more space as people work increasingly from home, and a stock market driven increase in money available for downpayment.

  • A rise in financial buyers — large corporations buying up homes to rent them out — is only making the market tighter, and decreasing the number of owner-occupied properties available.

  • What's missing: Unlike the mid-2000s, this time around there's no exuberant culture of condo flipping. While interest rates are low, lending standards are still tight, making it hard to buy a house you can't afford.

The good news is that rents have not been rising nearly as fast as prices. They stayed roughly flat during the pandemic, and are now rising at perhaps a 4% pace, Yun says.

Homebuyers are the biggest losers. In order to win bidding wars, many of them are being forced to make rushed and risky decisions. Successful bids often need to waive any financing contingency or right to inspect the property.

  • That raises the terrifying prospect of putting down a large downpayment and then not being able to get a mortgage — and/or finding that the house requires hundreds of thousands of dollars in repairs.

The worst-case outcome, says Yun, would be if "rates remain low, demand picks up with new jobs, there's no increase in supply, and the only thing that moves is home prices, until people get priced out. That would mean we are creating a divided society of haves and have-nots."

  • The best-case outcome, on the other hand, would be a construction boom accelerated by President Biden's infrastructure plan, which would create more supply and help to stop the rise in prices.

 

The bottom line: Housing prices are likely to remain high and rising for a while yet.

By Felix Salmon, author of Capital
Source: https://www.axios.com/housing-boom-bubble-mortgage-50b573de-94f0-4d7c-a34d-b2b40d9dc664.html

 

April 28, 2021

@properties' Spring 2021 Update

 

When the housing market revved up last summer, the talk focused on where buyers were moving to and why. From Zoom happy hours to cable news shows, armchair pundits fueled the narrative of a mass exodus from cities into suburbs. Within @properties, we also saw a spike in suburban sales, but it didn't appear to be at the expense of the city. Now, new data and research confirms what we've been saying all along: The demise of the city has been greatly exaggerated. 

In the latest episode of @ The Market, two distinguished guests, Dr. Sam Kling of the Chicago Council on Global Affairs and Dr. Geoffrey J.D. Hewings of the University of Illinois, dive into the findings and what they mean for both city and suburban markets post-pandemic. Then, @properties co-founders Mike Golden & Thad Wong provide some boots-on-the-ground analysis of current market conditions.

Watch to find out:

  • Why the pandemic alone won't create permanent changes in where we live
  • Whether home prices are expected to continue their recent rise
  • What this year's record-setting single-family home sales say about Chicago
  • Why 1- and 2-bedroom condo sales in the city are up double-digits over last year

For even more in-depth analysis of local market conditions, and for outstanding solutions to all your real estate needs, contact me any time!

April 21, 2021

A bill to help first-time homebuyers

But it's not a tax credit, and conditions limit how many people will qualify

Consumers have been closely following President Joe Biden’s proposed first-time homebuyer tax credit, but the latest legislative effort to assist homebuyers differs in several significant ways. The newest draft of a down-payment assistance bill would provide $25,000 to first-time homebuyers, but only those who are also first-generation homebuyers and economically disadvantaged. Plus Biden’s proposal is not actually a homebuyer tax credit, but it is money that would be available at closing.

On Wednesday, lawmakers published a draft version of the legislation, the “Downpayment Toward Equity Act of 2021,” ahead of a hearing held by the U.S. House Committee on Financial Services, which Rep. Maxine Waters chairs. During the hearing, lawmakers discussed a number of housing measures on the table in President Biden’s infrastructure package, including funding to shore up public housing.

The proposed down payment assistance would be means-tested based on income, and limited to those who have not owned a house for at least three years. To qualify, neither of the borrower’s parents may have owned a home. That qualification doesn’t apply if the borrowers’ parents lost their home in a foreclosure or short sale, or if the borrower has ever been in foster care, however.

Borrowers who make no more than 120% of the area median income where they live — or if they live in a high-cost area, 180% — would qualify for a baseline of $20,000. Those recognized as socially disadvantaged, because they are in a group that has been “subjected to racial or ethnic prejudice,” could receive an additional $5,000.

The grant funding — which is not a tax credit — could be used at closing toward a downpayment on a residential property with one to four units, including a condominium, cooperative project or manufactured housing unit.

The program, which is currently being discussed in the House of Representatives, would dole out funds to states based on population, median area home prices and racial disparities in homeownership rates.

State finance agencies would be tasked with administering the program and distributing the funds. But they could delegate that responsibility to community-based nonprofit entities, such as community development financial institutions, minority depository institutions, housing counseling agencies or community development credit unions.

The bill would not require that states contract with such groups, however. Last year’s Paycheck Protection Program drew heat for its over-reliance on large financial institutions to disburse loans, instead of community-based financial institutions, which are used more often by minority-owned businesses.

This would not be the first time the federal government has given first-time homebuyers a boost. A Bush-era program, the first-time homebuyer tax credit, allowed borrowers to claim a credit on their income taxes. The Obama administration continued the program until 2010.

President Biden first intimated he was considering a first-time homebuyer benefit while he was on the campaign trail. Unlike the Bush and Obama-era programs, however, under the draft legislation, borrowers would receive down payment assistance upfront.

A White House spokesperson said Chairwoman Maxine Waters’ proposal is not part of Biden’s infrastructure package, which includes largely supply-side investments. Other aspects of the legislator’s priorities are in the plan, including public housing capital investments, however.

In order for such a bill to pass, it would have to clear significant hurdles in both houses of Congress. If it were included in a larger infrastructure bill, that process would be slightly abbreviated. Political sources say the draft version is a starting point for discussion.

The bill seeks to narrow the homeownership gap by targeting first-generation homeowners. Multigenerational homeownership is a “quintessential component of why and how people become homeowners,” said David Dworkin, president of the National Housing Conference, and a third-generation homeowner.

Those who do not have family members to guide them through applying for a mortgage are less likely to submit themselves to a process that is “rife with fear and dread,” he said.

But the benefits of multi-generational homeownership can also be more material.

“I got the daddy down-payment loan. My dad was proud to give it to me,” Dworkin said.

Another concern is the impact a downpayment assistance program could have on the housing market, which has already seen a surge in home price appreciation. Any help from the Biden administration to first-time homebuyers could further raise prices, potentially complicating the mission of the legislation.

The targeting of the bill — layered on top of the income means-testing component — would also greatly reduce the share of borrowers eligible for the assistance, said David Stevens, the former president of the Mortgage Bankers’ Association.

“It would be a very small market,” said Stevens. “No legislation is perfect.”

By: HW, Georgia Kromrei

April 14, 2021

What Borrowers Need to Know About the Uptick in Mortgage Rates

 

When we recorded our  2021 Market Outlook at the beginning of the year, Proper Rate executive vice president of sales, Dan Moran, talked about how national average mortgage rates were sitting at record lows, with the rate on the 30-year fixed rate averaging 2.65%. Fast forward a couple of months, and that national average rate has jumped to 3.18%*, its highest level since last summer.

 

While rates in the 3% range are still extremely low by historical standards, the recent increase is a reminder of how quickly the rate environment can change, and why potential buyers as well as homeowners looking to refinance may have more incentive to act fast.

“There are a number of factors that drive mortgage rates up and down, so it’s important for borrowers to lock in their desired rate as quickly as possible,” Moran said, adding that a pre-approval is an essential part of the process.

He also noted that applicants should be focused on their payment just as much as their rate.

“In most instances, rates become a psychological trigger in that people want to get the lowest rate possible, but the actual amount of the monthly payment also greatly impacts loan qualification,” said Moran. “If rates are up or down a half a percent it could decrease or increase the loan amount a borrower could obtain, so it’s something to keep an eye on with your mortgage lender.”

Whether you’re planning to obtain a mortgage for an upcoming home purchase or thinking about refinancing, reach out to a Proper Rate loan officer. Meanwhile, be sure to contact an @properties agent for more information about your local real estate market.