Latest Housing National Projections. Is The Party Over?

Is the party really over or rebalancing itself?

Over the last decade, the seemingly unstoppable growth of the American housing market has created a bonanza for sellers, a cutthroat environment for buyers, and an endless source of fascination for just about everyone else.

It seemed to be an economic perpetual-motion machine. Could home prices in top markets really just keep going up and up ... and up?

Well, no, actually. In the last few months, the real estate market has actually begun slowing down—including in some of the big cities that have been leading the go-go post-recession housing boom.

What does it all mean?

We decided to explore beyond the alarmist headlines to find the 10 metropolitan areas* that are seeing the biggest shifts—and why.

To be clear, prices aren't always dropping in these places, which are predominantly located on the West Coast. Mostly, they're decelerating, coming back down to earth. So bargain hunters can put their wallets away.

But in addition to a substantial increase in the number of home listings with price reductions, we found other potentially game-changing signs of market adjustments, including a surge in the amount of inventory for sale and the number of days on the market.

Here are the brass tacks: List prices only rose 7.3% nationally year-over-year in October.

While that's certainly higher than most raises in compensation, inflation, and buyers' comfort levels, it's still less than the 10% annual hike the year before and the 8.2% jump the year before that.

Focus on the small victories, buyers! These markdowns can lead to more choices for those looking to purchase a home. And sellers, you're still making bank.

There's a rebalancing that needs to happen," says Len Kiefer, deputy chief economist at Freddie Mac. "Prices have risen so high in some of these markets that it's very tough from an affordability perspective [for buyers]. ... It's not surprising to me that we're seeing a little bit of a leveling off."

So stash the B-word, at least for now: The dreaded Housing Bubble isn't poised to pop. There are simply more homes for sale now and fewer buyers vying for them. In other words, the market is returning to some semblance of reality.

"Are we going off the cliff?" says Honolulu-area real estate broker George Krischke of Hawaii Living. "I don't have a crystal ball, but I don't think so. ... It's a temporary slowdown and may be a plateau."

To come up with our rankings of the real estate markets that are slowing down the most, we looked at annual price, inventory, days on market, and price reduction changes from October 2017 to 2018 in our realtor.com® listings in the 100 largest metros.

So why are these housing markets slowing down?

1. Mortgage rate increases are sidelining buyers

Unless buyers are paying all cash for their digs—not a likely scenario for most of us ordinary humans—they are probably smarting from rising mortgage interest rates. That's because even the smallest rate hikes of just fractions of a percentage point can add hundreds of dollars to monthly mortgage payments. Over the life of a 30-year loan, it can add tens of thousands of dollars.

Here's what's going on: Mortgage interest rates went up from 3.90% a year ago to 4.81% as of last week. That seemingly small 0.91% increase made mortgage payments $127 a month more expensive on median-priced homes of $295,000. It adds extra payments totaling $45,540 over the life of a 30-year fixed-rate mortgage, assuming that the buyers put 20% down. And of course, the more expensive the property, the more new homeowners will be forking over.

This is having an impact, real estate experts say. These increases are forcing some buyers to purchase cheaper, smaller homes and fixer-uppers in less sought-after locales. And it's led many aspiring homeowners to go into standby mode—waiting to see whether prices will drop to make the whole thing more financially viable. With less competition come fewer bidding wars, and more inventory that isn't being snatched up within an hour of the "For Sale" sign going up in the front yard.

Borrowers are facing a little "sticker shock," says Julie Aragon, a mortgage broker at Julie Aragon Lending Team in Santa Monica, CA, who works with buyers from San Diego, No. 5 on our list, and Oxnard, CA, No. 6. "They just don't realize how much [rates] went up. Even an eighth to a quarter of a percentage point increase is going to make a big impact."

That's particularly true in high-priced areas like the Southern California city of San Diego, where the median price of $659,400 is more than double the national figure.

“I’ve seen people lose $50,000 in purchasing power,” Aragon says. And that's giving buyers pause.

Higher rates are also stymieing move-up buyers who want to trade their starter homes for larger, nicer homes, but are reluctant to give up their existing low mortgage rates to do so, says Ted Wilson of Residential Strategies, a housing consultant based in the Dallas area.

The reality is that rates are still low compared to previous decades, when double-digit rates weren't uncommon.

“Folks have been used to a world of dirt-cheap mortgage rates," says Freddie Mac's Kiefer. "We’re moving to a world where rates are more in line with what we’d expect to see over the long term.”

2. Prices just got too damn high

Fact is, prices can't increase at record levels forever. And we may have finally hit an inflection point in many bellwether markets.   

"To some degree, the markets that went up the most and the fastest just pushed too hard [in prices]," says Patrick Carlisle, chief market analyst for Silicon Valley and the Bay Area at the real estate company Compass. "Over the summer, it was like something cracked, and people said 'I can't do this anymore.'"

In Silicon Valley's San Jose metro area, No. 2 in our rankings, prices shot up a whopping 22.2% from 2016 to 2017. And this was already one of the nation's most expensive places to live. But even hefty tech salaries can only stretch so far.

Add in those higher mortgage rates, and "that’s a whole lot more money that someone is going to have to spend to pay their monthly mortgage on a 1,500-square-foot, three-bedroom, two-bathroom ranch house that suddenly costs $2 million,” says Carlisle.

So is it any big surprise that about 36.8% of San Jose-area sellers have had to slash prices on their homes in the last year?

President Donald Trump's tax changes have also hit Silicon Valley and the Bay Area hard. (San Francisco comes in at No. 3 on our list.) Homeowners can now only deduct from their taxes mortgage interest on loans of up to $750,000, down from $1 million. This isn't just a rich person's problem—it's hard to find even a modest starter home for less than $1 million in this region.

Then add in a new $10,000 cap on property and either sales or income taxes. Suddenly, owning a home is a whole lot more expensive.

The entire West Coast, long the growth capital of the United States, is showing signs of being overheated. "For everyone, there's a maximum to what they can pay," says Annie Radecki, senior manager at John Burns Real Estate Consulting, who covers Seattle and Portland.

3. Sellers want to cash in while they can—leading to more homes for sale

More and more homeowners, fearing that the real estate market has reached its peak, are champing at the bit to sell. And that has led to a relative glut of available homes—more than even the hottest markets can easily absorb.

"There’s a perception [among owners] that the market has had a good run and maybe it’s time to cash in," says Honolulu broker Krischke. "The good times have to end."

In Stockton, CA, which came in first in our slowdown rankings, price drops are common because sellers shot too high, says local agent Jerry Patterson of Cornerstone Real Estate Group. This is a city that has long been plagued by crime and poverty. But its location, about an hour and a half northeast of Silicon Valley and close to the vineyards in Lodi, CA, gave it a boost in recent years, with annual prices rising 8.2% last year and 14.3% in the prior year.

But with more homes for sale and less competition for them, "buyers are now in a bit more of a power position," Patterson says. "[They're] able to flex their muscles a little bit more."

And sellers are learning the hard way that the danger of pricing their homes too high is that they can wind up stagnating on the market. "They're entering what we call the 'sludge,'" says Nashville real estate broker Brian Copeland, of Doorbell Real Estate. "There’s nothing wrong with their house. But that price becomes a stigma.”

4. New construction booms benefit buyers—but slow down sales

New construction in certain markets has given buyers more options—but developers may have overshot their goals, often to accommodate corporate growth. Just look at Nashville, TN, No. 4 on our list, where a new Amazon center is slated for location, and Dallas, No. 8, which has added more than 500,000 jobs in the last decade. About a third of Nashville-area home listings on realtor.com® and a quarter of Dallas-area listings are for brand-new homes.

In Dallas, "There's more inventory than there is demand," says Dallas-area Realtor Dee Evans of Ebby Halliday Realtors. But she's beginning to see the pace of new construction slowing, and those extra units are being absorbed by buyers. "Hopefully, the builders will be smart about putting less new stuff up."

* A metropolitan statistical area is a designation that includes the urban core of a city and the surrounding smaller towns and cities.

* Lance Lambert ran the data analysis on which this story is based.

www.realtor.com

Real Estates Biggest Slow Down Metros

Phoenix Valley February Real Estate Market Stats

Buyers & Sellers Jump For Joy!

Lower Interst Rates push down this week! Strong increase in January job numbers🎉#timetobuy#dreamhome

Reach out anytime. We’re available to partner with you wherever your next move may take you! 🦋

Today's Mortgage Rate Summary 

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. 

Rates Currently Trending: Lower

Mortgage rates are trending lower so far today.  The MBS market improved by +28 BPS.  This was been enough to improve mortgage rates or fees.  Rates experienced high volatility.

Today's Rate Forecast: Lower

Jobs: The January Challenger Job Cuts report moved higher from 43.8K in December to 52.9K in January. Much of that was due to a natural decline in Retail Sales staff after the Christmas ramp up. The closure of Gymboree accounted for about half of the Retail Sales layoffs. Initial Weekly Jobless Claims were higher than expected (255K vs est of 215K). The more closely watched 4-week moving average moved up slightly to 220,250 which is a very low level. The slight increase in the jobless claims is attributed to the government shutdown.

Manufacturing: The January Chicago PMI was a big miss, coming in at only 56.7 vs est of 61.5. Now, any reading above 50.0 is good, and readings above 55 are great. But we are used to extremely robust readings in the 60s.

Housing: November New Home Sales were much stronger than expected 657K vs est of 560K

Personal Outlays:  The PCE, Personal Income and Personal Spending reports were scheduled for today but have been postponed (just like yesterday's GDP) due to the government shutdown.

Trade War: The two sides continue two days of meetings. The president said that while the negotiations are going "very well," he said that "no final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long-standing and more difficult points."

Government Shutdown:  The 3-week reopening continues to appear to be in jeopardy as the 17 lawmakers on the Homeland Security Committee are getting nowhere fast on border security, a key issue for reopening the government. There needs to be a bipartisan agreement on some form of border security, however, according to many reports, the Democrats on the committee will not agree to funding any type of border wall which is why most market participants are pricing in another shutdown in 2 weeks.

Brexit: Prime Minister Theresa May had a rare win on Tuesday with a modified amendment (primarily focusing on removing a backstop and replacing it with a promise to find a better solution in the future). However, they are now faced with the daunting task of the EU reopening negotiations.

China: Manufacturing PMI 49.5 vs est of 49.3/Non Manufacturing PMI 54.7 vs est of 53.9

Germany: Retail Sales -4.3% vs est of -0.6%/Unemployment Rate 5.0% vs est of 5.0%

Eurozone: GDP (Q4) 0.2% vs est of 0.2%/Unemployment Rate 7.9% vs est of 7.9%

Today's Potential Rate Volatility:Average

Mortgage rates finally broke out of its very tight channel that developed over the last few weeks. Rates are pushing lower on a good deal of volatility. Tomorrow is likely to be another exciting day with a flood of economic data.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes only. You are advised to contact a financial expert before making any decisions.

Phoenix Housing Stats January 2018 - January 2019 Good Time to Sell? The Answer is YES!

For Buyers:
The monthly average interest rate rose to 4.64% in December 2018, up 0.69% from the previous December’s 3.95%. For buyers who will purchase at the current median sales price of $260,000, that equates to approximately $100 added to their monthly payment compared to last year.  Buyers averaged 1,845 square feet at this price; nearly 100 square feet smaller than if they had purchased last year.  And, renting may not be a suitable alternative. As single-family homes appreciated 8.1% per square foot, single family lease payments also rose 8.6% during the same time frame. With that, buying is still a good option over renting if only to stabilize one’s monthly housing expense. Sale prices will continue rising in the first half of 2019, but at a slower rate and they’re not expected to decline at this juncture. Instead, buyers may see a little more flexibility from sellers in the form of repairs, closing costs, and possibly interest rate buy-downs in the higher price ranges.
 
For Sellers:
Entering into 2019, the market continues to favor sellers but not nearly as much as it did at the beginning of 2018. Supply is still 34% below normal compared to 36% below normal this time last year.  It’s buyer demand that has shifted as buyers grapple with affordability and concerns about an overvalued market.  Demand at this time last year was measured 1% above normal; today it’s 13% below normal.  While it may feel like a buyer’s market compared to the last four years, it is far from one. Greater Phoenix is still in a seller’s market, however it’s weaker out of the gate.  This means there is still more demand than supply, but multiple offers will not be as common, there will be fewer sales overall and scenarios will vary widely depending on price range.  Demand could change in either direction depending on interest rates, however for the time being buyers and sellers must play the hand they’ve been dealt.  For those wondering if it’s still a good time to sell, the answer is “yes” for now.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report.

Time to Buy, Sell, Invest, 1031 Exchange? Let’s connect today and get started!