May 2019 Housing Market Update
Green Team Realty’s May 2019 Housing Market Update
Geoff Green, President of Green Team Realty welcomed everyone to the May 2019 Housing Market Update held on Tuesday, May 21 on Facebook Live.
Housing Market Update – National
Where we were and where we are is important. We were higher in January, February and March of 2018. And, while we’re not drastically lower, it still should be noted.
The Northeast is declining by the lowest level of the four regions of the U.S., with -1.5% decline in number of units sold.
The decline in sales by price category is a very interesting stat. $1-$100,000 is way down, probably because prices are rising and there are fewer and fewer homes in this range in the U.S. However, what is surprising is the percentage change in sales of high-end homes. According to various industry reports, the high end appears to be under siege. It’s losing traction faster than middle of the market properties.
Existing home prices are up, which is consistent with price lagging activity. We should continue to see an increase in price for some time. According to Dean Baker, Senior Economist of the Center for Economic Research: “To sum up the general picture, the U.S. economy is definitely weakening.” Again, it’s not as strong as it was. “However, with wages growing at a respectable pace and job growth remaining healthy, we should see enough consumption demand to keep the economy moving forward. That means slower growth, but no recession.”
How many months would it take to clear the current inventory on hand at the current rate of sale. In 2011 it was way up and now it is way down. However, the headline here is that inventory actually rose from 2017, 2018 to where we are now in 2019. Are more people are putting their homes on the market because prices have risen, or are fewer people buying homes. It’s probably a combination of both.
Mortgage rates are still historically low. Estimates for the second, third and fourth quarters of 2019 remain low. These are rates that many buyers can afford.
This graphic shows affordability. Wage growth is increasing. The price of homes hasn’t decreased, but the percentage of one’s income needed to purchase a medium-priced home has gone down compared to 2006 and 1985 to 2000. Homes are still relatively affordable to the average American – an important part of the American dream.
Recession or Market Slowdown? During the last series of recessions the market didn’t really crash. What happened in 2008 was an anomaly. The last time the housing crash caused the recession prices dropped dramatically. But in the previous four recessions, only once did they drop less than two percent. And the other three times prices actually increased. And two of those three times increased more than normal historic annual appreciation for the country. Therefore, recession doesn’t mean a housing crisis.
Housing Market Update – Orange County
Per Geoff, this is really the mother’s milk of the industry, and this is good news. We’re arguably above where we were last year at this time.
Prices are continuing to increase over last year and are actually above prices for the past five years at this same point in time.
This is the last asking price of the home versus what it sold for and this indicates a very strong market. Sellers are only having to negotiate approximately 2.5% off of their last asking price. Many homes are going at or above asking price. Many of the Green Team agents have told Geoff that there seem to be more bidding wars this year than last year.
Days on market continue to go down, below the last five years, another indication of the strength of the market.
Housing Market Update – Sussex County
The number of units sold is down consistently over the past two years. However, historically the numbers are still good and the agents in Sussex County are busy.
This has been a mixed bag for the last six years, with the numbers crisscrossing… The average price hasn’t really moved that much, though that may depend on the price category you’re in. Keren Gonen of Green Team New Jersey Realty will address this in the panel discussion.
This number is even higher in Sussex than in Orange County. Sellers are having to negotiate less than two percent on average from their last asking price.
Again, days on market are down. So it is still a solid, healthy market, with lots of homes being sold.
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Meet our Panel
Keren Gonen, Green Team New Jersey Realty
Trends in Sussex County
Geoff’s first question was to Keren Gonen regarding the downward trend of units sold in Sussex. According to Keren, there were a lot of bank-owned properties being released that were in inventory. This is a point that Keren has made consistently over many months. Geoff responded that days on market and ask to sold ratio indicate a strong market in contrast to the number of units sold, which does suggest outlying factors. Another related topic was increase in people aging in place. Not moving out of their homes, but choosing in-home care instead. Inventory shortage is still the biggest problem. Keren responded that it is indeed a problem.
The rental market vs. the housing market
With interest rates so low, many people are looking to buy homes. In Vernon buying is actually cheaper than renting, but there is just not sufficient inventory. And, when a good property appears on the market, everyone jumps on it. That is the reason days on market is so low. Geoff picked up the discussion on the rental market. Usually, he said, there is an inverse relationship: the hotter the housing market, the cooler the rental market. However, in this case (24-36 months) both markets in our area are super hot. He sees trends nationwide as well, with the amount of capital being put into rental properties, whether single family or multi-unit. Some lenders are even renting out their properties rather than putting them up for sale. A combination of population increases, people first coming into the market now are keeping both markets hot.
Mortgages and Sub-prime products
Geoff asked PJ Keelin to discuss the above graphic, Mortgage Originations by Age. What struck Geoff most strongly was the sheer number of loans originated in 2003 – 2007 than there are now. His take-away from this was sub-prime. Geoff has been saying that the one thing that could undermine all the positives in the current economy and housing market would be the reintroduction of these sub-prime products. While Geoff has not seen it, he checks with each lender that participates in our housing market updates if they have seen any of these products out there. The most he’s heard is “They’re here and there, but not prevalent.”
PJ agreed. He said that trends that Geoff discussed before, along with debt that people have and amount that people can afford, obviously in 2003 and 2004, the average household income was significantly different but mortgages were still being written. PJ believes that sub-prime will stay away for at least a while. Geoff believes they should never be reintroduced. He thinks it is important that buyers have “skin in the game,” whether it’s their credit or money. PJ thinks some people are starting to take more changes as these things go, but he thinks sub-prime will stay away for a little bit longer because you’re dealing with tough inventory that these products don’t have to come to allow people to purchase what’s out there. Geoff thinks that sub-prime should stay away forever.
PJ stated that it’s the same with any major credit situations. People were able to purchase right after foreclosures and bankruptcies. Some investors that had investment properties ten years ago and are having to deal with those aftermaths. All are going to require significant statutory investment, 20 or 30 percent as those prices go. Per Geoff, if you’re an individual and you’re confident in your business. However, lenders don’t want to lend to you because you’re an independent contractor, but you have substantial cash to put down, roll the dice.
At the end of the day, banks have been writing very good loans. They’re making money and as long as the banks are willing to lend money, it’s a win/win situation.
Composition of Debt Balance per Capita by State
The important thing to look at is everyone is looking at student debts as the largest portion of where their debts are allotted after their housing payments.. It’s important to educate people what banks are going to require. The breakdown of where these areas that we are doing business in are some with the highest debts.
The impact of student loans
Trending, the 20-39 age group is a smaller portion than the 40-59 age group. Millenials are generally not the first-time home buyer. It’s generally the person who has already established a family, rented for awhile, and now sees the different in renting versus buying. It is amazing to see how substantial student debt is. Hopefully solutions can be found to address the student loan bubble.
PJ is seeing another trend. The younger age demographic is being more mindful of their income and keeping themselves under where they’re actually able to afford and that’s affecting the percentage.
Addressing Keren, Geoff noted that he sees trends going towards smaller, more efficient homes, with people becoming more frugal. Keren agreed, giving an example of a buyer who had been approved for $400,000 but told her that they were more comfortable not going above $250,000. Keren makes it a point to tell potential buyers to find out what they are qualified for, but then to determine what amount they are comfortable with. That amount then determines the homes they’ll look at. She has also seen people looking for smaller, more efficient homes, noting that solar panels are a plus. Buyers looking for the much larger homes seem to be in the minority.
PJ believes that interest rates will be staying around where they are now. There might be a slight uptick with the strong housing market, but it doesn’t seem like anything drastic should be happening in the near future.
Keren added that some banks are now flipping homes themselves, while keeping costs down. She stressed the importance of good home inspections to find any issues with these types of properties.
Contact our Panelists:
PJ Keelin, Family First Funding, Warwick: 973-570-2094 (cell); 845-669-0974 (office)
Keren Gonen: 551-262-4062 (cell); 973-814-7344 (office)
Next Housing Market Update – Tuesday, June 18 at 2 p.m.
Register at Greenteamhq.com/HMU
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