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Spring 2022 Housing Market and Supply

by Colette Marcellene Ether, REALTOR® | Apr 7, 2022 | Real Estate

Along with the peak of pine pollen, the spring homebuying season is here!

Mortgage rates have gone up, but they’re still lower than the historic norm. The fear of future higher mortgage rates and higher prices have increased buyer urgency. While higher mortgage rates are pricing out some buyers, Bank of America says it won’t be enough to stop the housing market from posting strong home price growth this year.

Bank of America predicts that U.S. home prices will finish 2022 up 10%. That’s nearly double the average annual home price growth (4.6%) posted since 1989. However, it would be a bit of a deceleration: Between December 2020 and December 2021, the Case-Shiller U.S. National Home Price Index—the leading measurement of U.S. home prices—jumped 18.8%.

Homebuyers at nearly every price point are likely to face a competitive battle, but it shouldn’t resemble anything like 2021. Every single forecast model reviewed by Fortune in November 2021 predicted that home price growth would decelerate significantly in 2022. But we’ve already seen that consensus break apart.

Are We In a Housing Bubble?

No. Housing supply inventory is slowly increasing, but not at a pace to accomodate the current demand. In other words, it’s there are few homes to choose from, a continued high demand, and historicly low mortgage rates. This combinatoin favor a market leveling out to “normalcy” and highly unlikely to crash.

Rising household incomes, favorable demographics, and “shifting preferences due to remote work” should also put upward pressure on price growth, writes Bank of America. That demand corelates to low production on the supply side of the market—which is still hovering around four-decade lows for housing inventory.

The median home price in Wake County as of April 2022 is $410,000.

While it may be tempting to blame the pandemic for the current inventory shortage, the pandemic can’t take all the credit. While it did cause some sellers hold off on listing their houses in 2020 and 2021, the truth is the low supply of homes was years in the making.

Where Did the Shortage Come From?

It’s not just today’s high buyer demand. Low supply goes hand-in-hand with the number of new homes built over the past decades. According to Sam Khater, VP and Chief Economist at Freddie Mac:

“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”

Data in a report from the National Association of Realtors (NAR) tells the same story. New home construction has been lagging behind the norm for some time. Historically, builders completed an average of 1.5 million new housing units per year. However, since the housing bubble in 2008, the level of new home construction has fallen off (see graph below): A Look at Housing Supply and What It Means for Sellers | MyKCM The same NAR report elaborates on the impact of this below-average pace of construction:

“. . . the underbuilding gap in the U.S. totaled more than 5.5 million housing units in the last 20 years.”

“Looking ahead, in order to fill an underbuilding gap of approximately 5.5 million housing units during the next 10 years, while accounting for historical growth, new construction would need to accelerate to a pace that is well above the current trend, to more than 2 million housing units per year. . . .”

We’re already starting to see an increase in new home construction, which is great news. But newly built homes can’t bridge the supply gap we’re facing right now on their own. In the State of the Nation’s Housing 2021 Report, the Joint Center for Housing Studies of Harvard University (JCHS) says:

“…Although part of the answer to the nation’s housing shortage, new construction can only do so much to ease short-term supply constraints. To meet today’s strong demand, more existing single-family homes must come on the market.”

Early Indicators Show More Existing-Home Inventory Is on Its Way

When we look at existing homes, the latest reports signal that housing supply is growing gradually month-over-month.

So, what does all of this mean for you?

Just because life is starting to return to normal, it doesn’t mean you missed out on the best time to sell. It’s not too late to take advantage of today’s sellers’ market and use rising equity and low interest rates to make your next move.

Bottom Line

Even though the experts we talked with don’t anticipate any sudden price drops, the current expectation for the future is for price growth to continue–but at a slower pace than they have been recently.

If last year taught us anything, it’s the value of being prepared for the unexpected. Whether or not you decide to make a home purchase now or years from now, it needs to make sense for you.

As for sellers, the market needs more existing homes for resale to help level things out. That way when you sell you can also afford to level up!

3 Hot Topics in the Housing Market

by Colette Marcellene Ether, REALTOR® | Apr 5, 2022 | Real Estate

Here are three hot topics in the housing market right now and how they are impacting North Carolina.

If you’re a prospective buyer or seller, it’s important to understand the current real estate market conditions, housing supply and how it can affect you.

#1 Russia and Ukraine: The impact on North Carolina

The conflict in eastern Europe is causing concern in many ways. Beyond the humanitarian impact, we are seeing a correlation in the real estate market and beyond.

Homebuyers in the Triangle are looking for affordable homes with more land and better amenities in suburban and rural areas. That means longer commutes to work and shop which equals an increase in gas consumption as well. In addition to higher gas prices, the Russia-Ukraine conflict is disrupting the global marketplace. More specifically, within the supply chain which has yet to rebound from the effects of the pandemic.

#2 Housing Supply and Affordability

Raw material costs remain high and builders continue to struggle to keep up with homebuyer demand.

There’s an estimated 4 to 6 million homes that we’re short in the U.S. Even though new housing starts are at their highest in a decade, it’s still slow getting them off the ground. There’s a backlog, and there’s a home shortage.

The cost gap between owning a starter home and renting widened in 2021, and though the trend shows little sign of reversing, costs do appear to be leveling out so far in 2022.

There is some good news. Homes are still more affordable than they have been historically. So even with the recent increase and another looming around the corner, mortgage rates are still historically low giving you more buying power. And while housing supply is still low, we’re seeing steady increases in the number of homes coming to market, which gives hope to homebuyers. As the supply of homes for sale improves, buyers will have more options.

#3 Competition among homebuyers remains fierce

Although home sales fell slightly by some metrics during the first quarter, that may just be a seasonal pattern. Most experts expect the spring to be as busy as ever for real estate transactions.

We’re likely to continue to see these extraordinarily tight conditions in the homebuying market like fast closing timelines, all cash offers, high due diligence fees, and offers well over listing price–which can make it especially difficult for first-time homebuyers to compete.

Home Buying Preparedness Tips in a Competitive Market:

Get prequalified or preapproved for a mortgage. Lock in your rate.
Research the neighborhood where you want to move and stay open to other options
Understand your “have to haves” versus “want to haves” when you’re looking at properties
Be prepared to act quickly. Some homes sell within minutes or hours once they hit the market.
Continue to cut frivolous spending and retain those savings for due diligence fees and earnest money deposits.

Bottom Line

Don’t wait to buy if the numbers seem to work out for you now.

Most likely, a year from now, mortgage rates will be higher and home prices will be even higher, especially in the Triangle area. The market might leave you behind if you try to hold on for more favorable conditions.

For sellers, meanwhile, it’s still a good idea to make sure your property is attractive to buyers and that your asking price is reasonable. Just because the market is in your favor doesn’t mean it’s a good idea to sell it “as-is”. Light updates can make a significant impact. Don’t leave money on the table! It’s also smart to make sure you know where you’re going next, whether that means buying another property while you sell your current one, or having a rental lined up. Many homes sell within hours. If you’re curious how much you can get for your home, or if you’re not sure where to begin, connect with our team. We can create a home selling roadmap together.

Cool Home Feature: Dog Washing Station in Mudroom

by Colette Marcellene Ether, REALTOR® | Apr 1, 2022 | Construction, Home Buying, Real Estate

At this point, I don’t think custom dog washing stations at home are just a trend.

Whether in your garage, laundry room, or mudroom, having a dedicated space to wash, brush, and groom your beloved furry baby (or babies) is a cool home feature that is no longer uncommon and not just in luxury homes.

It sounds pretty self-explanatory, but what is a mudroom anyway?

mud·room

/ˈmədˌro͞om,ˈmədˌro͝om/

noun

a small room or entryway where footwear and outerwear can be removed before entering a house.” a proper mudroom would be far more useful; somewhere to take off wet coats, to air clothes, for dogs to sleep in”

This Oxford Dictionary definition literally states that it is also for dogs to sleep in. However, many family pets sleep in their own beds in the main part of the house, if not in the actual bed with their favorite people.

If you love sharing your home with a dog (or other beloved pet) but not muddy paw prints on the floor, carpet, or furniture, or if they simply won’t suffer the indignity of being hosed down in the backyard, a dog-washing station might be the best home improvement you’ll ever make.

Especially if you have a large dog. No need to carry them from the door into the tub when they realize what is about to happen. In fact, many dogs will prefer the ease of walking into their own bathing space that smells familiar to avoid the slippery tub struggle.

Even though this project can cost $1,500 or more, it pays for itself with the savings on trips to the groomers, carpet cleaning, and damage to the interior of your vehicle while transporting. It’s also far less stressful for your pet, especially if they suffer from anxiety or motion sickness.

Let’s be honest here, it makes it much more likely that you’ll actually give the dog a regular bath, keeping the “dog smell” at bay, especially on rainy days.

Historically, mud areas originated in rural settings where roads were unpaved and boots perennially muddy. They were usually just a small vestibule off the kitchen on the backside of a manor or farmhouse.

Today’s mudrooms are designed to reflect our busy lifestyles as well as the interior design of the home. Prior to the age of the Coronavirus outbreak, many Cary, Apex, Fuquay-Varina, and Holly Springs homes incorporated small drop zones near the entry or foyer.

These smaller spaces consisted of coat and backpack hooks, a bench, and a few cubbies for shoes and boots underneath. In some cases, these drop zone built-ins were equipped with cabinet doors to hide the contents, as well as add architectural and design features to the home.

Now many folks are opting for this feature in new construction homes in addition to (see what I did there? lol) adding them to existing homes. The size and layout may vary, but many mudrooms are multifunctional to use as a laundry room, and can even save you space if planned and executed correctly.

The other cool thing about a dog washing station is that they’re useful for other things as well. Many designs often work double duty for rinsing muddy boots, hosing down sports equipment, and other messy jobs or activities.

As of February 2021, 84.9 million or 67% of American households have at least one pet. While 63.4 million of those households have at least one dog.

If you are considering adding a dog washing station to your existing home, here are some design tips to consider and factor into your budget.

Plumbing

You will need to have a source of water and a drain that connects to your main sewer line. You also want to have hot and cold water hook-ups, and just like any other shower, a drain cover that prevents hair clogs.

Leash Clip/Hand Bar

Any tub or shower can get slippery when wet. Installing a hand bar or two to clip a leash to will keep your soapy furry friend from escaping or slipping and falling amidst their spa time.

Hand Held Sprayer

This is a must have for any washing station! Whether you need a quick paw rinse (i.e. the April pollening in North Carolina), or a full shampoo and rinse; it can help the task go more smoothly and keep water and soap out of your pet’s eyes and ears. It should be easily reachable from the tub’s edge. Place the faucet and the sprayer high enough on the wall so that your dog won’t bump their noggin.

Workable Size and Height

This will depend on what’s comfortable for you as well as the size of your pet. A 20 x 20-inch floor-mounted tub no more than 15 inches deep will allow a dog to climb in, but you’ll have to kneel to bathe them. Many stations are at floor level for larger breeds. However, waist height with a few steps will save your back from strain. If you have a small dog, consider installing the basin at a back-friendly height and lifting them in.

Water-Water Everywhere

Most dogs love a good shake after a bath, and there’s nothing you can do to stop it. Instead, plan ahead with a water-resistant surround and even glass doors. Large-format, easy-to-clean ceramic tiles are a solid choice. You could also try waterproof beadboard made from solid surfacing. Mop sinks are ideal because they’re deep enough to keep in water but shallow enough that it’s easy to guide your dog inside. Opt for one made of durable, scratch-resistant material, like terrazzo.

Shelving and Supply Storage

As with any kind of design, it pays to think about workflow. Having somewhere nearby to put brushes, shampoo, conditioner, and other treatments. A stack of towels nearby comes in really handy, and microfiber towels minimize drying time.

Tips for A Successful Bathtime

Once you’ve got the right space to clean up your pup, here are suggestions from the American Kennel Club for keeping the experience a positive one for all involved:

Avoiding Injuries

One of the biggest causes of injuries (for both you and your dog) is due to your dog acting up at bathtime on a wet and slippery surface. Ensure that your dog won’t be scrambling to keep her feet with non-slip surfaces in the shower and surrounding it. Keep your dog’s nails clipped to help them keep their footing. Textured tile, a rubber mat, and a non-skid rug on the floor for them to step on when they get out will help keep bathtime faceplant-free.

Check the water temperature before you turn the hand sprayer towards your dog—it should be no hotter than lukewarm. Use a gentle setting on the sprayer to keep your dog calm while rinsing.

Saving Time and Money

Installing a dog washing station will cost money, but it yields incredible benefits:

Less time spent on cleaning up pet hair.
Less time and money spent at the dog groomer.
Less money spent on carpet cleaning.

As we continue to resume life outside our homes, installing a dog washing station will mean you have more time to spend on other things, like snuggling your sweet dog!

If you need a list of local contractors, recommendations on how to select features and upgrades for your new construction home, or if you want help with your current home buying search, send me a text or give me a call today. I’m happy to help you, and your pets find their next cozy place!

All my best,

Colette

Today’s Real Estate Market Explained Through 4 Key Trends

by Colette Marcellene Ether, REALTOR® | Jul 22, 2021 | Real Estate

As we move into the second half of the year, one thing is clear: the current real estate market is one for the record books. The exact mix of conditions we have today creates opportunities for both buyers and sellers. Here’s a look at four key components that are shaping this unprecedented market.

A Shortage of Homes for Sale

Earlier this year, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels are starting to trend up. The latest Monthly Housing Market Trends Report from realtor.com says:

“In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.”

This is good news for buyers who crave more options. But even though we’re experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states. That’s why it’s still a sellers’ market, giving homeowners immense leverage when they decide to make a move.

Buyer Competition and Bidding Wars

Today’s ongoing low supply, coupled with high demand, creates a market characterized by high buyer competition and bidding wars. Buyers are going above and beyond to make sure their offer stands out from the crowd by offering over the asking price, all cash, or waiving some contingencies. The number of offers on the average house for sale broke records this year – and that’s great news for sellers.

The latest Confidence Index from the National Association of Realtors (NAR) says the average home for sale receives five offers (see graph below):For buyers, the best way to put a compelling offer together is by working with a local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what’s most appealing to the seller.

Home Price Appreciation

The competition among buyers is driving prices up. Over the past year, we’ve seen home price appreciation rise across the country. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices increased 15.4% year-over-year in May:

“The May 2021 HPI gain was up from the May 2020 gain of 4.2% and was the highest year-over-year gain since November 2005. Low mortgage rates and low for-sale inventory drove the increase in home prices.”

Rising home values are a big part of why real estate remains one of the top sought-after investments for Americans. For potential sellers, it also means it’s a great time to list your house to maximize the return on your investment.

A Rise in Home Values and Equity

The equity in a home doesn’t just grow when a homeowner pays their mortgage – it also grows as the home’s value appreciates. Thanks to the jump in price appreciation, homeowners across the country are seeing record-breaking gains in home equity. CoreLogic recently reported:

“…homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year over year, representing a collective equity gain of over $1.9 trillion, and an average gain of $33,400 per borrower, since the first quarter of 2020.”

That’s a major perk for households to leverage. Homeowners can use that equity to accomplish major life goals or move into their dream homes.

Bottom Line

If you’re thinking about buying or selling, there’s no time like the present. Let’s connect to talk about how you can take advantage of the conditions we’re seeing today to meet your homeownership goals.

3 Charts That Show This Isn’t a Housing Bubble

by Colette Marcellene Ether, REALTOR® | Jul 20, 2021 | Real Estate

With home prices continuing to deliver double-digit increases, some are concerned we’re in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is nothing like 2006 for three major reasons.

1. The housing market isn’t driven by risky mortgage loans.

Back in 2006, nearly everyone could qualify for a loan. The Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers’ Association is an indicator of the availability of mortgage money. The higher the index, the easier it is to obtain a mortgage. The MCAI more than doubled from 2004 (378) to 2006 (869). Today, the index stands at 130. As an example of the difference between today and 2006, let’s look at the volume of mortgages that originated when a buyer had less than a 620 credit score.Dr. Frank Nothaft, Chief Economist for CoreLogic, reiterates this point:

“There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent.”

2. Homeowners aren’t using their homes as ATMs this time.

During the housing bubble, as prices skyrocketed, people were refinancing their homes and pulling out large sums of cash. As prices began to fall, that caused many to spiral into a negative equity situation (where their mortgage was higher than the value of the house).

Today, homeowners are letting their equity build. Tappable equity is the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio (thus still leaving them with at least 20% equity). In 2006, that number was $4.6 billion. Today, that number stands at over $8 billion.

Yet, the percentage of cash-out refinances (where the homeowner takes out at least 5% more than their original mortgage amount) is half of what it was in 2006.

3. This time, it’s simply a matter of supply and demand.

FOMO (the Fear Of Missing Out) dominated the housing market leading up to the 2006 housing bubble and drove up buyer demand. Back then, housing supply more than kept up as many homeowners put their houses on the market, as evidenced by the over seven months’ supply of existing housing inventory available for sale in 2006. Today, that number is barely two months.

Builders also overbuilt during the bubble but pulled back significantly over the next decade. Sam Khater, VP and Chief Economist, Economic & Housing Research at Freddie Mac, explains that pullback is the major factor in the lack of available inventory today:

“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”

Here’s a chart that quantifies Khater’s remarks:Today, there are simply not enough homes to keep up with current demand.

Bottom Line

This market is nothing like the run-up to 2006. Bill McBride, the author of the prestigious Calculated Risk blog, predicted the last housing bubble and crash. This is what he has to say about today’s housing market:

“It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low.”

What You Should Do Before Interest Rates Rise

by Colette Marcellene Ether, REALTOR® | Jul 19, 2021 | Real Estate

In today’s real estate market, mortgage interest rates are near record lows. If you’ve been in your current home for several years and haven’t refinanced lately, there’s a good chance you have a mortgage with an interest rate higher than today’s average. Here are some options you should consider if you want to take advantage of today’s current low rates before they rise.

Sell and Move Up (or Downsize)

Many of today’s homeowners are rethinking what they need in a home and redefining what their dream home means. For some, continued remote work is bringing about the need for additional space. For others, moving to a lower cost-of-living area or downsizing may be great options. If you’re considering either of these, there may not be a better time to move. Here’s why.

The chart below shows average mortgage rates by decade compared to where they are today:Today’s rates are below 3%, but experts forecast rates to rise over the next few years.

If the interest rate on your current mortgage is higher than today’s average, take advantage of this opportunity by making a move and securing a lower rate. Lower rates mean you may be able to get more house for your money and still have a lower monthly mortgage payment than you might expect.

Waiting, however, might mean you miss out on this historic opportunity. Below is a chart showing how your monthly payment will change if you buy a home as mortgage rates increase:

Breaking It All Down:

Using the chart above, let’s look at the breakdown of a $300,000 mortgage:

When mortgage rates rise, so does the monthly payment you can secure.
Even the smallest increase in rates can make a difference in your monthly mortgage payment.
As interest rates rise, you’ll need to look at a lower-priced home to try and keep the same target monthly payment, meaning you may end up with less home for your money.

No matter what, whether you’re looking to make a move up or downsize to a home that better suits your needs, now is the time. Even a small change in interest rates can have a big impact on your purchasing power.

Refinance

If making a move right now still doesn’t feel right for you, consider refinancing. With the current low mortgage rates, refinancing is a great option if you’re looking to lower your monthly payments and stay in your current home.

Bottom Line

Take advantage of today’s low rates before they begin to rise. Whether you’re thinking about moving up, downsizing, or refinancing, let’s connect today to discuss which option is best for you.

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