In a recent survey of home sellers by Qualtrics, 87% of respondents said they were concerned their home won’t sell because of the pandemic and resulting economic recession. Of the respondents, 51% said they are “seriously worried.” That concern seems reasonable considering the current condition of the economy. The data, however, is showing that home purchasers are still very active despite the disruptions American families have experienced this year.
The latest Existing Home Sales Report published by the National Association of Realtors (NAR) revealed that 340,000 single-family homes sold in this country last month. NAR’s most recent Pending Sales Report (homes going into contract) surpassed last month’s number by over 44%, which far exceeded analysts’ projections of 15%. ShowingTime reported that appointments to see homes (both virtually and in-person) have increased in every region of the country and are up 21.4% nationwide over the same time last year.
While buyer activity is surging, the number of listings has fallen to an all-time low. Zelman Associates, in their latest residential real estate report, revealed that housing inventory as a percentage of households has fallen to 1.2%, which is half of the long-term average and lower than any other time in our history.
Bidding Wars Heating Up Again
With buyer demand growing and the supply of available homes shrinking, purchasers are again finding themselves needing to outbid other buyers. NAR, in a recent blog post, revealed:
“On average, there were about three offers on a home that closed in May, up from just about two in April 2020 and in May 2019 (2.3 offers).”
Bidding wars guarantee houses sell quickly at a price near or even slightly over the listing price.
Bottom Line
If you’re thinking of selling, don’t be concerned about putting your house on the market right now. There’s no better time to sell an item than when demand for it is high and supply is low. It is exactly at that time when you will negotiate your best possible deal.
Taking Advantage of Homebuying Affordability in Today’s Market
Everyone is ready to buy a home at different times in their lives, and despite the health crisis, today is no exception. Understanding how affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down their optimal window of time to make a purchase.
There are three main factors that go into determining how affordable homes are for buyers:
- Mortgage Rates
- Mortgage Payments as a Percentage of Income
- Home Prices
The National Association of Realtors (NAR), produces a Housing Affordability Index, which takes these three factors into account and determines an overall affordability score for housing. According to NAR, the index:
“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”
Their methodology states:
“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”
So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:
Taking Advantage of Homebuying Affordability in Today’s Market | Keeping
Current Matters
The green bar represents today’s affordability. We can see that homes are more affordable now than they have been at any point since the housing crash when distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.
Why are homes so affordable today?
Although there are three factors that drive the overall equation, the one that’s playing the largest part in today’s homebuying affordability is historically low mortgage rates. Based on this primary factor, we can see that it is more affordable to buy a home today than at any time in the last seven years.
If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.
Bottom Line
If you feel ready to buy, purchasing a home this season may save you significantly over time based on historic affordability trends. Reach out to a local real estate professional today to determine if now is the right time for you to make your move.