Today’s Real Estate Market – The Unicorns Have Galloped Away
In a normal housing markets, comparing real estate metrics can be difficult. This is due to the fact that the market can be unpredictable, making the comparison less accurate or meaningful. Unpredictable circumstances and outcomes can be affected by unpredictable events. Comparing the numbers of this year to those of the two ‘unicorn years’ we have just experienced is almost useless. This is a less common definition for ‘unicorn’: “Something that’s highly desired but difficult to find.” The pandemic has profoundly affected real estate in the last few years. The demand for our own home skyrocketed. People also needed a large backyard and a home office. The market was flooded with first-time buyers and second-homebuyers.
Mortgage rates, which were already low, have been lowered to new historic lows.
The forbearance program has all but eliminated foreclosures.
Home values have never been so high.
Now, things are returning to normal. The unicorns have galloped away. It makes no sense to compare today’s market with those years. Here are three examples. Buyer Demand If you read the headlines, it would seem that there are no buyers. In the United States, we still sell more than 10,000 houses per day. Buyer demand is down compared to the two ‘unicorn years’. According to ShowingTime, we can compare it with normal years (2017-2019) and see that buyer activity remains strong (see graph below). According to Freddie Mac’s data, both 2020 and 2021 had historically high appreciation rates. Here’s another graph that shows the more normal years of 2017-2019: We can see that home values are returning to normal. In the second half 2022, there were several months with minimal depreciation. Fannie Mae claims that the market returned to a more normal appreciation rate in the first quarter this year. The percentages will increase. These are increases over historically low rates of foreclosure. Here is a graph from ATTOM, a provider of property data: There will be an increased number compared to the last three year’s numbers now that the foreclosure moratorium has ended. Every year, homeowners lose their homes to foreclosure. It’s heartbreaking. If we put the current figures into perspective, it’s clear that we are actually returning to the normal filings of 2017-2019. Bottom LineThere will be some very unsettling headlines about the housing market in 2019. The majority of the headlines will be based on inaccurate comparisons with the ‘unicorn years’. A real estate professional can help you put things in perspective.
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