Tallahassee Real Estate BlogRecently posted or modified blog posts by tag - Zillowhttps://www.manausa.com/blog/Copyright Manausa.com2024-03-04T08:24:07-07:00tag:manausa.com,2012-09-20:42184Zillow Shares Forecast For 92.2% Of US Households<img src="https://assets.site-static.com/userfiles/663/image/zillow-housing-market-update-mar-2024.jpg" width="880" height="577" alt="Zillow's comprehensive analysis of the US housing market March 2024" title="Zillow Housing Market Update March 2024" class="img_box_center" />In an ever-evolving housing market, understanding the intricate balance between supply and demand is crucial for anyone looking to navigate the complexities of buying, selling, or investing in real estate. With fluctuating inventory levels and shifting economic indicators, the need for precise and current data has never been more critical.
This article delves into the latest trends and analyses, leveraging Zillow's comprehensive database to offer a detailed snapshot of the current state of the U.S. housing market. From examining the historical context of home availability to interpreting the implications of rental rate adjustments, we provide insights essential for making informed decisions in today's real estate landscape.<br /><br />
Supply Of Homes For Sale Is Rising
To accurately assess the health of the housing market, you must first examine the supply and demand relationship. Therefore, our initial graph presents the supply levels since 2019.
<img src="https://assets.site-static.com/userfiles/663/image/number-homes-for-sale-zillow-march-2024.jpg" width="880" height="576" alt="History of number of US homes for sale" title="Zillow's Count Of Homes For Sale" class="img_box_center" />
We color-coordinated each year on the graph, showing that 2024 (represented in purple) offers roughly the same number of homes for sale as 2021. This marks a slight improvement over the past two years, yet it remains significantly below the necessary levels. It's important to note that the red line (2019) indicates the highest inventory levels across all six years, even when 2019 experienced an undersupplied market!<br /><br />Demand Has Fallen For 26 Straight Months
This graph displays the monthly number of homes sold (blue lines) alongside the year-over-year change percentage (yellow bars on the right axis).
<img src="https://assets.site-static.com/userfiles/663/image/home-sales-count-zillow-march-2024.jpg" width="880" height="576" alt="History of US home sales recorded by Zillow" title="Zillow's Count Of Home Sales" class="img_box_center" />
Since December 2021, the monthly sales of homes have been on a decline, driven by mortgage interest rates more than doubling and inventory levels dropping to a record low.
Many YouTubers predicted that this falling demand would lead to a crash in home prices. However, they overlooked a crucial aspect of the housing market: Homebuilders are not constructing homes at their usual rates, meaning the bulk of the inventory comes from homeowners. These individuals contribute one unit of supply when they sell and then create one unit of demand when they purchase.
The lack of available options and the increased cost of borrowing have pushed many sellers out of the market. Consequently, the reduced demand from these potential sellers has been offset by the simultaneous decrease in supply.<br /><br />Still A Strong Sellers' Market
By merging the supply data with the demand data, we can calculate the available months of supply. Historically, a six-month supply was viewed as balanced, indicating a state of market equilibrium. However, I now think market equilibrium is achieved with a supply of closer to four months (<a href="https://www.manausa.com/blog/housing-market-equilibrium-change/" title="Market Equilibrium: How The Balance Has Changed In Real Estate">see why here</a>).
<img src="https://assets.site-static.com/userfiles/663/image/months-supply-homes-for-sale-zillow-march-2024.jpg" width="880" height="576" alt="History of month's of supply of US homes for sale" title="Zillow's Months Supply Of Homes For Sale" class="img_box_center" />
This graph shows the inventory months of supply in the largest U.S. metropolitan areas, underscoring the persistent strength of a sellers' market.
A gold band spans the graph horizontally, offering a broad estimate of market equilibrium. For those adhering to the traditional six-month supply standard, only three major metropolitan areas have shifted towards a buyers' market.
If you consider a four-month supply as balanced, then only ten Metropolitan Statistical Areas have moved in favor of buyers. Regardless of the chosen benchmark, over 90% of Americans reside in areas dominated by a sellers' market.
Even with falling demand, the lack of new inventory means the market dynamics for home sellers remain unchanged. Sellers adopting an <a href="https://www.manausa.com/how-to-sell-your-house/" title="Sell House 2024">aggressive, omnichannel pre-marketing approach</a> continue to attract strong interest and achieve high returns from buyers.
<br /><br />The Zillow Crystal Ball Says ...
Zillow is bullish on home prices over the next twelve months.
<img src="https://assets.site-static.com/userfiles/663/image/real-estate-appreciation-rate-zillow-march-2024.jpg" width="880" height="576" alt="Real estate appreciation rate history from Zillow" title="Zillow's Report On Real Estate Appreciation" class="img_box_center" />
This graph ranks the top 14 metropolitan areas based on Zillow's projected home price appreciation. Thomaston, GA, leads the pack with Zillow predicting a 10.2% increase in home prices by the end of January 2025. Zillow anticipates a 4.2% rise in US home prices overall, with only 7.7% of all Metropolitan Statistical Areas expected to see declines.
Regardless of your opinion on Zillow, it's undeniable that their extensive and rapidly updated database offers valuable market insights and data, which has significantly aided my understanding of home sales in the US.
<br /><br />What Stabilizing Rents Mean In The For Sale Market
Our last graph in today's analysis showcases the Zillow Observed Rent Index, calculated by averaging the listed rents in the 40th to 60th percentile range for all homes and apartments. We monitor rents to gain an edge in forecasting future changes in home prices.
<img src="https://assets.site-static.com/userfiles/663/image/rent-appreciation-rate-zillow-march-2024.jpg" width="880" height="576" alt="Zillow's measurement of rental rates over time" title="Zillow's Rental Rate History Graph" class="img_box_center" />
We monitor rental rates to gauge housing demand, affordability, and investment potential. Rising rental rates can indicate a strong market, pushing renters towards buying and attracting investors. This data helps us understand market dynamics, economic health, and the rent-buy decision process.
By analyzing rental trends, we can predict shifts in the housing market, advising clients effectively on buying, selling, or investing in single-family homes. Essentially, rental rates offer insights into the broader housing ecosystem, influencing demand for single-family homes and guiding strategic decisions in the real estate market.
Since the pandemic's start, rental prices have jumped 29.4%, with an average annual increase of 7% over the past four years. Remarkably, nearly two-thirds of this surge occurred in 2021 alone. This dramatic increase was tempered by a boom in apartment construction and a slowdown in economic growth.
As of now, rents have risen 3.4% from last year, reaching $1,958, as reported by the Zillow Observed Rent Index (ZORI). This rate of annual growth is slightly below the pre-pandemic average of about 4.1% seen in 2018 and 2019. In 47 of the 50 largest metro areas, rents have increased from the levels seen a year ago.<br /><br />Constrained, Cooling, Higher-Priced, Evolving Market
The data and trends presented in this article paint a comprehensive picture of the current state of the U.S. housing market. From the supply and demand dynamics to the nuanced shifts in rental rates, it's clear that understanding these patterns is crucial for anyone looking to navigate the real estate landscape effectively.
Despite the challenges posed by low inventory levels and rising mortgage rates, the market remains steady, with certain areas experiencing significant price growth. This resilience underscores the importance of staying informed and adaptable in changing market conditions. For those looking to make informed decisions, whether buying your first home, selling, or investing in real estate, the need for accurate, up-to-date information has never been greater.
To further your understanding of the U.S. housing market and to stay ahead of the curve with the latest updates and analyses, I strongly encourage you to visit the <a href="https://www.youtube.com/Manausa" title="Joe Manausa YouTube">Joe Manausa Real Estate Channel on YouTube</a>. There, you'll find a wealth of videos that delve deeper into market trends, offering insights and advice that can help you navigate the complexities of the real estate world.
Whether you're a seasoned investor or a first-time buyer, the Joe Manausa Real Estate Channel is invaluable for anyone looking to make informed decisions in today's market. Don't miss out on the opportunity to enhance your real estate knowledge—visit the channel today and take the first step towards achieving your real estate goals.2024-03-04T04:00:00-07:002024-03-04T08:24:07-07:00Joe Manausatag:manausa.com,2012-09-20:40230Discover the Latest in Home Affordability With Zillow's Cutting-Edge Tracking Tools<img src="https://assets.site-static.com/userfiles/663/image/zillow-housing-market-update-november-2023.jpg" width="880" height="587" alt="Zillow graph plots home affordability for both new homeowners and new tenants" title="Zillow's Home Affordability Tracker" class="img_box_center" />Are you captivated by the growing saga of the home affordability crisis?
Zillow, a leading giant in the real estate domain, has recently unveiled innovative tracking tools that offer fresh insights into this vital topic. Join us as we delve into the treasure trove of data housed in the Zillow Data Vault.
Updated monthly, the Zillow resource provides some of the most up-to-the-minute information on home sales across the top 1,000 U.S. housing markets. In our latest report, we zoom in on the data that sheds light on the current home affordability crisis.
Prepare to be informed and engaged as we unravel the complexities of the housing market through Zillow's advanced analytical lens.<br /><br />
Zillow's Median Home Price Tracker
This graph plots the median list price and median sales price of homes over the past five years.
<img src="https://assets.site-static.com/userfiles/663/image/Zillow_Median_Home_Price_Report_November_2023.jpg" width="880" height="641" alt="Zillow's tracking of the Median US Home Price" title="Zillow Median Home Price" class="img_box_center" />
While many people called for home prices to crash, we have consistently warned that the supply of homes for sale was insufficient for today's demand. Even as home affordability crashes, the fewer buyers in the market have resulted in fewer sellers in the market, so home prices have been sheltered.
Also note that numerous reports of falling home prices coincided with seasonal norms (home prices rise and fall year-long, though, for the past 100+ years, the general trend has been rising).
We did see home prices come down a few percent year-over-year, but nothing like the 30% to 50% the doomsayers called for. Zillow anticipates higher prices next year, forecasting 2.2% growth.<br /><br />Zillow's Home Affordability Tracker
This graph plots home affordability for both new homeowners and new tenants.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-monthly-home-affordability-tracker-nov-2023.jpg" width="880" height="641" alt="Zillow's US Home Affordability Tracker For Home Prices And Rental Rates" title="Home Affordability Tracker" class="img_box_center" />
One way to measure home affordability over time is to compare the monthly cost of owning or renting a median-priced home over time. This measurement uses historical data on home prices, rental rates, and mortgage interest rates to determine how the median homeowner/renter has fared with the changes in the housing market.
The blue line shows that the median homebuyer today spends 40.5% of the median wage to own a home. This is more than double the 20% paid ten years ago and well above the 35.7% peak hit during the housing bubble in 2006.
Renters have seen a rise lately, too, from 27.7% ten years ago to 30.5% today. I expect rents to increase as leases expire and new tenants move in.<br /><br />Rental Rates - The Housing Supply Litmus Test
Across America, the average rental price now stands at $2,011, marking a modest but notable increase of 3.2% compared to the previous year and showing a slight rise from the figures reported in September. This recent upturn marks the first instance of accelerated annual rent growth since the pandemic's zenith. Despite this growth, there was a slight dip in rent prices from September, a trend typically observed around this time of the year.
This October might signal a pivotal moment, potentially halting the nearly two-year trend of decelerating rent growth. The Zillow Observed Rent Index (ZORI) has evidenced a minor acceleration in the annual rent change, increasing by 3.23% from the previous year, a fractional advance over the 3.19% annual growth noted in September.
<img src="https://assets.site-static.com/userfiles/663/image/Zillow_ZORI_November_2023.jpg" width="880" height="641" alt="What does Zillow's report on rental rates have to do with home prices?" title="Zillow Observe Rent Index" class="img_box_center" />
While this may suggest a shift towards a return to average growth rates, it's also possible that the market is simply finding a new equilibrium. Despite the slight annual increase, the average asking rent in the U.S. experienced a marginal decrease from September to October, aligning with the seasonal patterns noted in the years before the pandemic's onset.
The rising rental rates in the United States serve as a clear indicator of the tight supply in the housing market. The persistent upward trend in rents suggests that the availability of affordable housing remains limited. This dynamic underscores the fundamental economic principle of supply and demand—prices inevitably rise when the demand for rental properties outstrips the supply. The recent increases in rent, even if slight, point towards a continued strain on housing availability across the country.<br /><br />According to the latest reports from Zillow, the U.S. housing market is currently undergoing several significant changes:
The Federal Reserve has increased interest rates 11 times, resulting in mortgage rates ranging from 7.5% to 8%—the highest in 22 years. The Federal Reserve indicates that these higher rates are expected to persist, impacting the cost of borrowing for prospective homeowners.
Home sales are projected to reach their lowest point since 2013. As of October 19, 2023, mortgage rates have reached 8%. This increase in mortgage rates, combined with a limited supply of homes on the market, has slowed down home sales. This year could mark the slowest sales rate in a decade.
Despite the overall market slowdown, sales of new single-family homes in the U.S. hit a 19-month peak in September. However, the rate of new home construction remains below historical averages.
These trends indicate a complex housing market that presents challenges for both buyers and sellers. Buyers face higher interest rates and down payments in a market characterized by limited inventory and elevated prices. On the other hand, sellers may benefit from high sale prices but face a diminishing pool of potential buyers, mainly due to affordability issues and increased borrowing costs.
The current market dynamics as of November 2023 reflect ongoing economic shifts and changes in consumer behavior following the pandemic. Keep a close eye on inventory and mortgage interest rates, as they will lead you to a logical, sound understanding of home affordability and the health of the US housing market.2023-11-13T04:00:00-07:002023-11-20T08:26:42-07:00Joe Manausatag:manausa.com,2012-09-20:391497 Critical Graphs: Zillow Decodes US Housing Market Complexities<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-sales-report-sep-2023.jpg" width="880" height="587" alt="7 Critical Graphs: Zillow Decodes US Housing Market Complexities" title="Zillow Decodes US Housing Market Complexities" class="img_box_center" />Is the American Dream of homeownership slipping through our fingers? With home prices and rents soaring at unprecedented rates, the U.S. faces a housing crisis that threatens not only individual dreams but also the fabric of our communities.
Zillow has just dropped a bombshell: seven critical graphs that decode the complexities of today's U.S. housing market and predict its future trajectory. If you've ever wondered why home prices are skyrocketing or why your dream home feels increasingly out of reach, this comprehensive analysis is your roadmap. Don't miss this essential read—it unpacks the data that could determine your next housing decision.<br />
Read on to discover the surprising factors contributing to this nationwide dilemma, why merely hoping for lower prices won't solve it, and the urgent call to action that could safeguard our collective future.<br /><br />
How Many Homes Are Selling?
Our first graph paints a clear image of the declining demand in the US housing market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-unit-sales-report-september-2023.jpg" width="880" height="641" alt="Zillow's count of unique home sales for September 2023" title="Zillow Home Sales Count September 2023" class="img_box_center" />
The blue bars in this graph indicate the monthly home sales and the yellow bars show the year-over-year change for each month. For instance, 275K homes were sold in August, marking a nearly 24% decrease from the 360K homes sold in August of last year.
U.S. home sales have dropped for 24 consecutive months. This decrease began when mortgage interest rates doubled, strongly linking the decline in buyer interest to reduced home affordability. Furthermore, many potential buyers currently hold mortgages with rates below 3%. The prospect of facing rates above 7% makes it nearly impossible for them to consider moving.<br /><br />How Many Homes Are For Sale?
Understanding the demand has declined, let's shift our focus to the supply side of the US housing market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-report-on-us-homes-inventory-september-2023.jpg" width="880" height="641" alt="Zillow's count of the supply of homes for sale for September 2023" title="Zillow Home Inventory September 2023" class="img_box_center" />
The blue bars in this graph represent the number of unique active home listings for each month, while the red line indicates the year-over-year change in available homes for sale. There are 950,000 homes on the market, which is a 13% decline from the 1.092 million homes available last year. It's important to note, though not shown in this graph, that today's listings are 76% lower than the numbers during the housing bubble years.
Back in 2008, there were far too many homes for sale when the government chopped away at available loan programs. The oversupply caused prices to fall. The opposite condition exists today. A healthy housing market should maintain an inventory of 2 to 3 million available homes, so today, we are terribly undersupplied. This shortage has skyrocketed home values and rental rates, creating an unsustainable and unhealthy housing market.<br /><br />Zillow Forecast For 894 Local Markets
Even with diminished demand, the lack of available homes has created pricing pressures in most local US housing markets.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-values-by-local-market-september-2023.jpg" width="880" height="641" alt="Zillow's forecast for 894 local housing markets for September 2023" title="Zillow Local Market Forecasts September 2023" class="img_box_center" />
Zillow is forecasting an average appreciation rate in the US of 4.9% for the next twelve months and sees 92.2% of all local US housing markets post gains in home prices.
Sure, some markets are defying the overall US trend, but if you are reading this, you are likely in a market where home prices will continue to grow. The lack of inventory will keep declining demand in check, so don't expect home affordability to improve any time soon.<br /><br />Median Home Sales Price Continues Higher
Many people hoped for a decline in home prices, but as we predicted, that outcome was unlikely given the underbuilt state of the U.S. housing market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-sales-price-september-2023.jpg" width="880" height="641" alt="Zillow's calculated median home sales price September 2023" title="Zillow Median Home Sales Price September 2023" class="img_box_center" />
The blue bars in this graph display the median sale prices for homes across various U.S. metropolitan areas, while the red line tracks the year-over-year change in these median prices. A dashed line marks the zero-percent point for year-over-year change in median home prices.
Although we saw a period of decline in year-over-year home prices last year, that phase has ended. Last month, the year-over-year median price increased by nearly 5%, which Zillow anticipates will continue for the next twelve months. So, what do those who previously warned of falling home prices have to say now?
The findings in this graph align with supply and demand analyses. As demand decreased, the supply of available homes also shrunk. Many potential sellers, who are also prospective buyers, chose not to move, thus reducing future inventory.
Homebuilders have not been producing enough residences to meet the needs of our growing population. Until we return to traditional building rates, we can expect the home affordability crisis to worsen.<br /><br />What Are Home Sellers Receiving?
According to Zillow, home sellers are receiving their full asking prices.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-average-sale-to-list-price-ratio-september-2023.jpg" width="880" height="641" alt="Zillow's report on what home sellers are receiving at the closing table September 2023" title="Zillow Sale To List Price Ratio September 2023" class="img_box_center" />
This graph displays the mean sale-to-list ratio, which is the sales price divided by the final list price.
Historically, we expect this ratio to fall between 97% and 98% for the overall market. However, due to limited inventory, sellers are commanding the market across most price ranges and areas.
Just over a year ago, this ratio soared to more than 102%, a level I've never seen in my 32 years in the industry. Our housing market is currently imbalanced, with home prices escalating too rapidly. To stabilize the situation, we urgently need to increase home construction before conditions deteriorate further.<br /><br />Are Home Value Changes Equal Across All Price Points?
Zillow divides the housing market into three equal tiers, ranging from high to low, to assess variations across different price points. This segmentation allows for a more nuanced understanding of market dynamics.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-september-2023.jpg" width="880" height="641" alt="Zillow's three tiers calculating home values for September 2023" title="Zillow Home Value Index By Tiers September 2023" class="img_box_center" />
In this graph, Zillow presents the year-over-year percentage change in the home value index for each of the three price tiers: the top tier in blue, the middle tier in red, and the bottom tier in gray.
At first glance, it seems that all three tiers follow a similar trend, although the top tier exhibits slightly more volatility than the others. However, a concerning pattern emerges after examining the entire data set, which spans from 2001 to the present. Here are the annual growth rates for each tier:
Top Tier: 4.68%
Middle Tier: 4.80%
Bottom Tier: 5.07%
The rates of home price appreciation are not uniform across these tiers. Notably, the fastest growth is happening in the least affordable tier, exacerbating housing affordability issues.<br /><br />What Rental Rates Tell Us About Home Affordability Change
The last graph in this report showcases trends in U.S. rental rates, serving as a valuable indicator to either refute or confirm the existence of a supply shortage in the overall housing market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-observed-rents-september-2023.jpg" width="880" height="641" alt="Zillow's measurement of rental rates US and Tallahassee September 2023" title="Zillow Observed Rental Rates September 2023" class="img_box_center" />
The graph displays two sets of data for rental rates: one for the typical U.S. market and another for the local market in Tallahassee.
The solid blue line represents the observed average rent in the U.S., while the blue-dashed line portrays Tallahassee's rental market. Similarly, the solid red line indicates the year-over-year change in U.S. rental rates, and the dashed red line shows the same metric for Tallahassee. This comparison provides valuable insights into local and national rental rate trends.
Both the U.S. and Tallahassee rental rates continue to rise, although at slower rates compared to the last two years. Nevertheless, these increases are still above historical norms. When both home prices and rental rates escalate at rates higher than historical averages, it clearly indicates that a housing shortage is at the core of the issue.<br /><br /><br />We Must Prioritize Balance In The Housing Market
The current state of the U.S. housing market demands immediate and decisive action. While the challenges to restoring equilibrium are multifaceted and often divisive, inaction is not an option. If we fail to act, we risk escalating the housing affordability crisis to a point where the majority of Americans will find themselves renting from large investment funds, rather than building equity through home ownership.
The government's interference in the mortgage market in 2006 initiated a shock wave, disrupting "normal operations" in housing for a decade and leading many homebuilders to halt production at traditional rates. Consequently, we find ourselves in a housing paradox: America desperately needs more homes, but escalating costs in today's inflationary market render building at scale virtually unfeasible.
Ignoring the supply-demand dynamics will only worsen the situation. Unless you anticipate a drastic decrease in U.S. population, maintaining the status quo is not an option. Given that we foresee slow to moderate population growth, we must parallelly strive for a comparable increase in housing inventory.
The time for half-measures is over. Continuing to produce homes at merely one-third of historical rates is untenable. We must rally our resources, unify our efforts, and prioritize housing construction to redress this imbalance. The cost of inaction is too great; it's time to build our way out of this crisis.2023-09-25T03:00:00-07:002023-09-25T06:43:51-07:00Joe Manausatag:manausa.com,2012-09-20:37824Unlocking the Housing Market Puzzle: Zillow's Latest Forecast Indicators<img src="https://assets.site-static.com/userfiles/663/image/zillow-housing-market-update-august-2023.jpg" width="880" height="587" alt="Get ready to uncover the current state of the US housing market as we dive into three key indicators for market forecasting" title="Unlocking the Housing Market Puzzle: Zillow's Latest Forecast Indicators" class="img_box_center" />Get ready to uncover the current state of the US housing market as we dive into three key indicators for market forecasting.
In today's housing market update from Zillow data, we'll unveil the surprising twists and turns shaping recent trends, shedding light on the challenges and opportunities ahead.
Join us as we explore the supply and demand for homes, analyze critical forecasts, and provide you with the insights you need to understand the current state of the market. From falling prices to rebounding indicators, this video will equip you with a clear understanding of where things stand and what to expect in today's housing market.
<br /><br />
Zillow Median Home Price Report
Our first graph plots the median sales price of all homes sold on Zillow.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-sale-price-july-2023.png" width="880" height="641" alt="Graph of median home price over time from Zillow data" title="Zillow Median Home Price Report" class="img_box_center" />
Home prices have fallen for three months and four of the past six months. In December, there was a recorded decline in home prices compared to the previous year, marking the first time this has happened in over ten years. However, recent data from Zillow suggests that home prices are already starting to rebound.
From May to June, the average home value in the United States increased by 1.4%. This growth continues a trend of rising home values over the past four months, driven by a shortage of new listings. The current typical home value in the country is now at an all-time high of $350,213, surpassing the previous peak of $348,225 reached in July 2022.
The second quarter is historically the busiest time for the housing market, which held true in 2023. However, the future is still being determined as buyer demand usually decreases during the summer. This year, there is an additional challenge of limited new listings, creating a situation where strong buyer demand meets a shortage of available properties.<br /><br />Zillow Real Estate Supply Report
The following graph provides insight into the housing shortage and the accompanying crisis.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-real-estate-inventory-history-july-2023.png" width="880" height="641" alt="Graph of residential unit inventory over time from Zillow data" title="Zillow Housing Inventory Report" class="img_box_center" />
The inventory of homes for sale has dropped below last year's level and is slightly higher than the record low recorded in early 2022.
To put this graph into context, let's consider the total number of listings (represented in blue), which reached approximately 1.7 million homes in 2019, marking the peak over the five years depicted in the graph. However, if we were to extend this report back to 2006, we would observe more than 4 million homes rise during the housing bubble. Presently, the inventory represents more than a 75% decrease compared to the number of houses recorded by Zillow back then.
This shortage of homes is playing a role in driving up home prices. Despite decreasing affordability, prices continue to rise due to the insufficient construction of houses to accommodate our growing population.
Many people predicted a collapse in home prices, but they failed to consider the inventory issues and the subsequent decline in supply alongside demand. Although we have observed a modest decrease, the following graph will reveal Zillow's forecast for the upcoming year's changes in home prices, which may surprise you.<br /><br />Zillow's Forecast For Home Prices
In our final graph and analysis, we present Zillow's forecast for home prices in the upcoming year. This forecast also highlights the markets where Zillow anticipates declining home prices.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-price-forecast-july-2023.png" width="880" height="641" alt="Zillow's forecast for home prices over the next year" title="Zillow Home Price Forecast By Metropolitan Area" class="img_box_center" />
According to Zillow's forecast, home prices are expected to rise in nearly 98% of the 895 markets they track. They anticipate an overall increase of 6.3% in US home prices.
In the Tallahassee market area, Zillow has projected a growth rate of 6.2%. However, considering the current unprecedented level of economic growth, the actual appreciation rate will likely surpass 10%.
Suppose you find yourself skeptical of Zillow's findings. In that case, it's important to question whether your doubts stem from wishful thinking that home prices will decrease to improve affordability or if a recency bias influences it due to the past experience of home price declines under different circumstances 15 years ago.
Notably, Zillow recorded a 28% decrease in new listings in June, strengthening the support for rising home prices. Zillow estimates that the housing shortage now exceeds 5 million homes, while other estimates suggest a shortage as high as 8.54 million homes needed for market stabilization. This scarcity is why I anticipate home prices to rise in all markets, except for a select few, over the next year.<br /><br />The housing market has experienced fluctuations in home prices, with a recent decline followed by signs of a rebound.
Home prices have continued to rise despite declining demand due to rising mortgage interest rates. The shortage of housing inventory has contributed to the persistent upward pressure on prices, driven by a healthy level of buyer demand and limited new listings.
Zillow's forecast indicates that home prices are expected to increase in most of the markets they track, with a projected overall rise of 6.3% in the United States. In the Tallahassee market area, where significant economic growth is currently observed, the actual growth rate will likely surpass Zillow's projected 6.2% rate.
With the ongoing scarcity of homes and estimates suggesting a shortage of millions of homes needed for market stabilization, the expectation is that home prices will continue to rise in most markets in the coming year.<br /><br />2023-07-31T03:00:00-07:002023-07-31T08:54:13-07:00Joe Manausatag:manausa.com,2012-09-20:36048Zillow Insights: 5 Graphs That Reveal the US Housing Market in 2023<img src="https://assets.site-static.com/userfiles/663/image/zillow-insights-graph-housing-market-5-2023.jpg" width="880" height="587" alt="Zillow has just released new data that provides valuable insights into the changes taking place in the real estate industry" title="5 Graphs That Reveal the US Housing Market in 2023" class="img_box_center" />
Are you curious about the current state of the US housing market?
Zillow has just released new data that provides valuable insights into the changes taking place in the real estate industry. But that's not all - we've got something even more exciting for you!
Our team has analyzed the data and created five graphs that go beyond Zillow's report, providing an unparalleled view of the current housing market conditions. And one of these graphs offers a unique perspective on housing market pricing that you've never seen before.
Don't miss out on this chance to stay ahead of the game and understand what's happening in the real estate world!<br /><br />
Are Home Prices Heating Up?
As of late, prices in the housing market are showing signs of a rebound, indicating that demand is returning.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-report-us-home-prices-may-2023.jpg" width="880" height="641" alt="Zillow reports the change in home prices each month across major US metropolitan areas" title="Are Home Prices Heating Up?" class="img_box_center" />
This uptick is likely due to dips in mortgage rates and alternative financing strategies becoming available. Existing home sales are negatively impacted as inventory levels are much lower than pre-pandemic levels. The low inventory levels are mainly due to existing homeowners being "trapped" in their homes with low mortgage rates, making it challenging for them to move to homes with higher mortgage rates coupled with higher home prices.
The low inventory is expected to continue influencing prices in the housing market, making it challenging for buyers to transact in the foreseeable future. Even as we move further away from the era of 3% rates, existing homeowners will eventually become less attached to their ultra-low monthly payments, and new listings will gradually fill the market again.
Unfortunately, new home construction is decreasing, so overall inventory will remain limited. As a result, prospective buyers waiting for prices to become more affordable will be sorely disappointed in the future.
A better plan for people desiring a new home includes exploring alternative financing options, such as down payment assistance or buying their rate down. Unfortunately, buyers in today's low-inventory market will have difficulty encouraging sellers to help, as sellers often deal with more than one offer on their homes.<br /><br />All Price Points Move Higher (AGAIN)
As the spring home shopping season continues, entry-level shoppers should anticipate a more challenging market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-price-index-may-2023.jpg" width="880" height="641" alt="Entry-level shoppers heading into spring can expect a tighter market" title="Zillow Home Price Index May 2023" class="img_box_center" />
This spring shopping season, entry-level homebuyers should brace for a tighter market than those shopping for middle and upper-priced homes. In March, the bottom third of the home price distribution saw a 9.5% annual appreciation. Since last year, home values for entry-level homes have experienced the most annual appreciation in most markets.
Before the pandemic, it was typical for low-tier homes to be comparably down faster than middle and top-price-tier homes, but the pandemic accelerated that growth. This means buyers who were not ready or able to take advantage of historically low-interest rates two years ago will find themselves in a significantly more expensive market with less purchasing power. For some buyers, this means they cannot enter the market at all. For others, it means setting their sights on homes they might never have considered owning.
Top-priced homes rose by just 1.3% over the past year and appear poised to hit an annual decline. Before the housing bubble, home builders could produce new homes in all three tiers (or at least the top two tiers in most markets). But with increases in the minimum wage and inflation, builders can no longer deliver homes in the bottom tier of home prices so we must anticipate further growth in the neediest segment of the housing market.<br /><br />Home Price Growth Not Equally Distributed
When we segment the market into three home price tiers, the home affordability crisis gains some clarity.
<img src="https://assets.site-static.com/userfiles/663/image/how-home-prices-are-changing-may-2023.jpg" width="880" height="641" alt="This graph segments the market in thirds to show how home prices are changing" title="Zillow Home Price Growth Rates May 2023" class="img_box_center" />
Nationally, prices for entry-level homes have increased by 9.5% year-over-year, with Tampa, Richmond, and Charlotte seeing over 60% appreciation from pre-pandemic levels. In Tampa, I know of two recent law school graduates who are getting married and looking for a home, and they cannot find anything within their budget. If two young attorneys combining their salaries cannot afford a home, what does that tell you about housing affordability?
On the other hand, top-tier priced homes only increased by 1.3% over the past twelve months. High mortgage interest rates are equally affecting the supply of homes across all price tiers. New listings for bottom, middle, and top-tier homes are comparably down. However, middle and top-tier shoppers are experiencing fewer bidding wars compared to pre-pandemic years.<br /><br />Spring Brings Momentum to Housing Market
Though home sales are down more than 30% compared to last year, it is the time of year when we expect the highest demand from buyers.
<img src="https://assets.site-static.com/userfiles/663/image/real-estate-seasonality_graph.jpg" width="880" height="641" alt="Graph shows how active each month is for homebuyers" title="Real Estate Seasonality Graph" class="img_box_center" />
This graph shows the percentage of annual contracts by month, measuring the decision dates of buyers rather than closing dates.
The housing market experiences more activity at certain times of the year, which is referred to as "seasonality." We are currently in the most active time of the year, which typically spans from March through July. This five-month period typically sees about the same number of contracts as the seven months of August through February.
The traditional seasonal patterns in the housing market were disrupted in the previous three years due to COVID, plunging mortgage interest rates at the end of 2020 and throughout 2021, and rising interest rates in 2022 after the first quarter. It's as though there was a conspiracy working against seasonality in the housing market. Despite this, we expect to see the usual seasonal uptick in buyer activity through July in 2023.<br /><br />What Is Holding Back Home Sales?
I anticipate that there will be robust buyer activity in May 2023, but I expect the number of homes sold to be considerably less than last year. The current supply of available homes for sale is inadequate to support a significant recovery, so we are relying on homebuilders to increase inventory and bolster the market.
Unfortunately, homebuilders face the challenge of delivering homes that the market can afford. Unlike low-inventory periods in the past, the current era faces an epic disparity between the cost of new and used homes, with new homes averaging nearly double the price of existing homes.
<img src="https://assets.site-static.com/userfiles/663/image/new-home-costs-versus-existing-home-costs-april-2023.jpg" width="880" height="641" alt="The cost of new home construction is through the roof" title="New Construction Costs (versus) Existing Home Prices" class="img_box_center" />
By way of example, in Tallahassee, our median existing-home price is $255,000, while our median new home price is 93% higher at $492,000. Simply put, we need a bunch more $255K homes, but the median builder home is priced at $492K.
Understanding The Home Affordability Housing Crisis
Though the graph above was created from the Tallahassee real estate market data, it parallels what you will find in most other local US housing markets. The numbers might be a little different, but the relative difference between new and used home costs is very real.
The picture this graph paints is very clear. The average cost difference between new and used homes (measured in price per square foot, shown in blue) was typically below 10% for the thirty (30) years ending in 2011. Today, the difference is three times greater.
Higher housing prices resulted from communities making it harder to develop land for housing. To bring infrastructure up to date, communities required developers to pay for past shortcomings from previous developers, which means that current developers had to factor in additional costs to their budget. These costs extended beyond just the increased demand that new homes would place on the system.
We've also seen the largest growth in the minimum wage over the past five years (Florida saw the minimum wage grow by more than 75% in a five-year span). On top of that, the NIMBY movement challenged most new developments in the works, adding even more costs due to cancellations, disapproval, or reductions in unit density. Most US metropolitan areas have made housing unaffordable with 30 years of poor policy and poor decision-making.
The shortage of housing supply is a persistent problem that cannot be ignored. If left unaddressed, it will intensify inequality between those with access to affordable housing and those without access. Addressing this issue requires active and concerted efforts at the local level. If you want to be a part of the solution for affordable housing, it starts in your own backyard. Get active in your community and let your elected officials know that you care and you are paying attention to what they are doing.2023-05-08T03:00:00-07:002023-05-22T15:07:37-07:00Joe Manausatag:manausa.com,2012-09-20:35218A Home for Everyone? Zillow's Real Estate Update Reveals Clue<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-sales-report-march-2023.jpg" width="880" height="587" alt="March 2023 Zillow Housing Market Update" title="Zillow Housing Report March 2023" class="img_box_center" />
Are you ready to take a deep dive into the latest trends and insights shaping the housing market today?
In this article, we'll guide you through ten real estate market graphs from Zillow that offer a comprehensive understanding of the current landscape. From changing home values to shifting demand activity, we'll reveal the key factors driving the market and explore how they could impact your buying or selling decisions.
Join us on this exclusive journey and gain valuable insights into the real estate landscape, presented in a detailed and easy-to-understand format. Let's begin our exploration!<br /><br />
Holistic Approach Required To Understand Housing
To truly understand the current housing market, relying on a single metric can be misleading and inaccurate. While metrics such as home prices or inventory levels can provide a general idea of market performance, they only paint a small picture of the complex and multifaceted housing market.
For example, if home prices are rising, it doesn't necessarily mean the market is healthy or an ideal time to buy or sell. Instead, a price increase could be due to a lack of inventory, low-interest rates, or high demand in specific areas. It could also indicate a speculative bubble that could burst at any moment.
On the other hand, metrics such as housing starts, building permits, mortgage delinquency rates, and foreclosure rates can provide valuable insight into the market. Examining multiple metrics is crucial to gaining a comprehensive understanding of the housing market's trends, challenges, and opportunities.
For instance, if housing starts and building permits are decreasing while prices are increasing, it could signify a potential shortage of housing supply in the future. Similarly, rising mortgage delinquency rates and foreclosure rates could indicate financial stress among homeowners and potential risks for the overall market.
Therefore, understanding the housing market requires a holistic approach that considers various metrics and data points. By doing so, you can gain a more accurate and nuanced understanding of the market, which can guide your decisions as a homeowner, homebuyer, or real estate investor.
In this report, we'll examine ten key metrics that Zillow tracks to deliver a comprehensive update on the housing market's current state. By exploring these metrics, we'll gain valuable insights that can help us make informed decisions about the housing market's trends and future direction.
Demand Continues To Fall
You have probably heard about the decreasing number of homes sold each month in the real estate market. To better understand this trend, Zillow has provided a graph displaying its estimated number of unique properties sold per month. The graph depicts an 18-month trend, providing insight into the current state of the real estate market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-sales-count-march-2023.jpg" width="880" height="641" alt="Zillow's count of all US home sales March 2023" title="Zillow Unit Home Sales Graph March 2023" class="img_box_center" />
In this graph, Zillow reveals home sales in the US have been declining for the past eighteen months up to February 2023. Year-over-year sales are a crucial metric in understanding market trends, as they remove the influence of seasonality by comparing the same months each year. For instance, February 2023 saw 31% fewer homes sold than February 2022.
It's essential to note that this graph only contains data since 2009, and the peak of home sales during that period is significantly lower than the number of homes sold during the housing bubble from 2004 to 2006. This reminds us that recent years were not marked by the irrational exuberance of overhyped new investors that artificially propped up the market more than fifteen years ago.
So you might wonder why home sales have declined for eighteen months. In this article, we will examine the possible reasons behind this trend and what it could mean for the future of the real estate market.<br /><br />
Mortgage Interest Rates And The Demand For Homes
This graph displays the average 30-year fixed mortgage interest rate dating back to 1971. The most recent months on the graph can explain one of the reasons for the recent decline in home sales.
<img src="https://assets.site-static.com/userfiles/663/image/mortgage-interest-rate-history-graph-march-2023.jpg" width="880" height="641" alt="Average monthly mortgage interest rates March 2023" title="Recent Mortgage Interest Rates Graph March 2023" class="img_box_center" />
In mid-March, the Mortgage News Daily website reported that the average 30-year fixed mortgage interest rate was 6.5%, a 46% increase from the rate one year ago at 4.5%.
While there has been a large increase in the rates charged to homebuyers, nearly a year has passed since rates exploded higher, so many buyers in the market have adjusted. With rates still 14% lower than the historical average, I'm not concerned about buyers adjusting to current rates (so long as they do not move too much higher).
Many reports blame the decline in home sales solely on higher mortgage interest rates, but that story does not pass muster, and here’s why:
Home sales started plummeting months before rates hit 3.3%. They started to slide when mortgage interest rates were at record lows, so we cannot solely blame the current housing market woes on mortgage interest rates. In fact, home sales fell for six consecutive months where mortgage interest rates were below 4%, so there has to be more to declining home sales than just an increase in mortgage interest rates.
The upcoming graphs will uncover other significant reasons behind the decrease in home sales and may provide an explanation for the stability of home prices. However, it is essential to note that no single metric can fully explain future trends in the housing market. We need to consider various data points to have a more comprehensive understanding.<br /><br />The Inventory Of Homes For Sale
The inventory report has unveiled a stark difference between the current real estate market and that of the past. To be clear, today’s market is very different than the one in 2006 that led to the housing bubble. Unlike the situation in 2006, when the inventory of homes for sale was rising rapidly, there has been a notable decline in the number of unique property listings available each month since the beginning of 2019.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-listings-count-mar-2023.jpg" width="880" height="641" alt="Zillow's inventory of US homes for sale March 2023" title="Zillow Inventory Of Homes For Sale Graph March 2023" class="img_box_center" />
This graph plots the number of homes available each month, shown in blue, and the year-over-year inventory change, represented by the red line. The point where the red line intersects with the dashed-blue line in July 2019 and July 2022 indicates the market's shift from inventory growth to inventory reduction and back to growth.
Although there has been concern by some of a significant increase in inventory, the 17% rise in listings is nothing compared to the over four million listings during the housing bubble years. Today, we have well below 850,000 homes listed, 79% fewer than fifteen years ago.
Reports anticipating the inventory to rise as home sales decline overlook the source of new listings. With new construction inventory significantly lower than historical norms, we must rely on discretionary sellers to meet our inventory needs.
However, most discretionary sellers are also discretionary buyers. When a buyer cannot afford a home and leaves the market, a discretionary seller also leaves. Over 50% of the time, a buyer leaving the market also leads to a seller leaving the market. As move-up and move-down buyers have slowed, inventory growth is not as expected.<br /><br />Monthly Inventory Of Listings
This graph provides a different way of looking at the number of listings in the past four years and helps showcase the inventory volume decrease.
<img src="https://assets.site-static.com/userfiles/663/image/number-zillow-home-sales-month-year-march-2023.jpg" width="880" height="641" alt="graph of US home sales by month and year ending March 2023" title="Number Home Sales By Month & Year March 2023" class="img_box_center" />
This graph compares the monthly influx of listings from the previous four years to this year's listings, represented by the black line. The number of homes available for sale is slightly higher than in 2022 but still far lower than what was available in 2019, 2020, and 2021. It's important to note that inventory was scarce in those years as well, so we need to be alarmed; Not that there are fewer homes than usual, but fewer homes are available than in years with insufficient listings.
Currently, the number of listings is much lower than in recent years, and all four years shown were seller's markets with too few listings to meet the demand in the market. For home prices to fall for an extended period, demand must significantly decrease to reverse the supply and demand dynamic. While some markets may experience falling home prices due to declining populations, most US housing markets have a supply void that has slowed buyer activity, even when mortgage interest rates were below 4%.<br /><br />New Listings Still Too Few
This graph depicts the monthly count of newly listed properties in the market for the past four years, and currently, the number of new listings is at its slowest.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-new-listings-last-month-march-2023.jpg" width="880" height="641" alt="Graph of new listings in the US for March 2023" title="New Listings Last Month March 2023" class="img_box_center" />
Many national news media outlets have predicted impending doom with home prices set to plummet, but the decreasing inventory suggests otherwise. For there to be a significant decline in prices, the supply needs to exceed demand. However, the graph shows that the supply is decreasing at a similar or faster rate than the demand. Hence, there is no indication of a growing supply issue at this time.
On the contrary, due to the supply shortage, there will be added pressure on home prices to rise should anything happen that stimulates demand. Therefore, according to Zillow's most recent data, it is reasonable to conclude that home prices will not significantly decrease in most local US housing markets.<br /><br />Home Appreciation Is Slowing
Let's look at what Zillow reports about the median US home price.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-price-mar-2023.jpg" width="880" height="641" alt="Zillow's measure of the median home price March 2023" title="Zillow Median Home Price Graph March 2023" class="img_box_center" />
This graph displays the median list price in the blue field, and the red line plots Zillow's estimate of the median home sales price during the same period. The blue field demonstrates a seasonal pattern, with prices starting low at the beginning of the year, increasing in the summer, and then decreasing slightly towards the end of the year. Reports of "list prices dropping" are insignificant and ignorant, as the median list price routinely declines at the end of each year.
This graph highlights two essential points. First, home prices generally increase, so it's reasonable to expect end-of-year asking prices to be higher than at the beginning of the year. Second, sellers who initially asked for inflated prices earlier in the year often have to reduce their prices to sell before the year's end. Homeowners can ask any price they want, but they need to meet the market at the right price to sell their property.
The red line in the graph shows that there is no discernible intra-year cycle for home prices; they tend to rise steadily. Although the median home sales price had been increasing rapidly in the past few years, the decreasing number of sales has now flattened the median home price growth rate. It will take a few more months to determine if buyers are purchasing cheaper homes or if home values are declining.<br /><br />Zillow Expects Slower US Home Home Price Growth
This graph estimates the median home price in the US, taking into account the typical prices of single-family homes, condominiums, and co-ops.
However, this graph stands out because it concentrates on a specific market segment. It analyzes properties between the 35th and 65th percentile, representing the middle third of the market. The graph accurately estimates the median home price trends over time by examining this range of homes. This gives us a unique perspective and a better understanding of the US housing market.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-march-2023.jpg" width="880" height="641" alt="Zillow's Graph Of The Median Home Price March 2023" title="Zillow Median Home Value Index March 2023" class="img_box_center" />
By closely examining this graph, you will notice that Zillow has provided home value data from 2000 to 2024. This is because their dataset includes both historical data and a prediction that home values will increase by 1.0% over the next year.
It's worth noting that Zillow's estimation has become more conservative. For example, in January of last year, it estimated an annual growth rate of 17.3%.
Zillow's Home Value Index sheds light on the alarming decline in home affordability. According to Zillow's estimates, the median home price has increased by more than 109% since February 2012, with an annual growth rate of nearly 7%.
Comparing the rate of home price growth over the past two years to the rate during the housing bubble reveals a concerning trend. The steepness of the slope indicates a faster acceleration in price increases, which explains the decline in the affordability of homes.
And Zillow is not the only real estate platform predicting home price growth.
CoreLogic Expects 3.1% Growth In Home Prices
First American CoreLogic, Inc., a large provider of US property and ownership information, just released their forecast for home prices.
<img src="https://assets.site-static.com/userfiles/663/image/corelogic-home-price-forecast-march-2023.jpg" alt="CoreLogic Home Price Forecast Graph March 2023" title="Corelogic Home Price Forecast March 2023" class="img_box_center" width="880" height="641" />
CoreLogic predicts that home prices will increase by 3.1% in the coming year, more than three times Zillow's forecast.
It's important to understand that the supply and demand of homes is the primary factor affecting changes in home prices. The fact that prices have risen steeply in the past isn't relevant; we should be focused on the shortage of available homes that is driving this issue.
Due to the extremely low number of homes on the market for sale, home prices have skyrocketed. As the next graph shows, home prices are rising in most markets in Zillow's report.<br /><br />Are Home Prices Falling?
Are you hoping that home prices will fall? If so, brace yourself for some surprising information! According to Zillow, reports of falling home prices only apply to just 8% of cities tracked by Zillow and are not widespread across the country.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-year-over-year-home-price-change-march-2023.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth March 2023" title="Year-Over-Year Home Price Changes March 2023" class="img_box_center" />
Of the 896 cities reported by Zillow, 822 posted growth in home prices for the past twelve months. Only 74 markets reported declines.
Zillow continues to report year-over-year increases in home prices in the US, but understandably, some of our readers may have heard different news. To delve deeper into the issue, let's explore why there are conflicting reports about declining home prices.<br /><br />Month-Over-Month Home Prices: Growing In 57% Of US Markets
This graph shows which housing markets in the United States have had the largest increase in home prices over the past month.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-month-over-month-home-price-change-march-2023.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth March 2023" title="Month-Over-Month Home Price Changes March 2023" class="img_box_center" />
Out of the 896 cities that Zillow reported on, 629 (70%) experienced an increase in home prices in December, while 267 (30%) saw a decrease. This could be why there are numerous reports of declining home prices.
If you've been following my recent reports on US home prices, you may remember that the median home price typically rises in a staggered manner throughout the year or decreases similarly in declining years. It would be premature to identify a trend in price changes after just a few months because doing so would have resulted in reporting declines for the past five years, even though the median home price was rising.
It's evident that the growth rate for home prices is slowing down, but it's too early to predict that we'll see annual price drops in most US housing markets. The market is still appreciating, with 92% of markets reporting annual gains and 70% showing monthly gains.
When reports suggest a significant decline in home prices, such as 30%, 40%, or 50%, it's important to question the data that led to that conclusion. I certainly have not encountered such data.<br /><br />Rental Rates Are The Key For Measuring Supply
The median rental rate graph holds the key to affirming or refuting reports on the overall supply of homes in the US. As we all know, when there is a shortage of homes available in the market, both home prices and rental rates tend to skyrocket, while the opposite happens when supply exceeds demand. Thus, Zillow tracks rents as well as home prices as a useful indicator of supply imbalances, making the median rental rate graph a crucial tool for understanding the US housing market.<br />
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-rent-index-march-2023.jpg" width="880" height="641" alt="Zillow's measurement of the change in rental rates March 2023" title="Zillow Observed Rent Index Graph March 2023" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
This graph displays the monthly rental rate index (median rent) in blue and the year-over-year percentage change in red. The significant growth shown in red, which peaked at over 17% annual growth in February, is worth noting. However, rents have grown by 6.3% in the past twelve months, which is slower than the rates observed in the prior months.
This rising trend is due to the declining inventory of homes for sale and rent. As a result, buying and renting a home have become more expensive, which is reflected in the increase in rental rates. In February, the median rental rate of $1,976 was 24% higher than the median rental rate recorded two years ago. This shows that rental rates have also become unaffordable, along with home prices. After all, who do you know that could easily handle a 24% increase in the cost of living?
The fact that both rents and prices are increasing together confirms that the supply of homes in the US is insufficient to meet the growing demand. This shortage will likely continue until a significant output from US home builders. Although there are some markets where the supply of homes exceeds demand, the overall US housing market remains undersupplied.<br /><br />The Crisis That Is Home Affordability
The current state of home affordability is a major issue that demands attention. People who cannot afford to buy a home are also being priced out of the rental market. Even when home prices fell in 2008, rental rates continued to rise, indicating a significant problem with the housing inventory.
This issue in 2008 stemmed from decreased demand for homes for sale, mostly caused by the government's intervention in the housing market. The government's measures to control the market made it very difficult for borrowers to qualify for loans, which resulted in only the wealthiest buyers being able to purchase homes. This, in turn, led to increased demand for rental properties, driving up rental rates even as home prices dropped.
Today, the housing crisis is primarily caused by a lack of inventory. Even after doubling, mortgage interest rates are still relatively low, so they cannot be blamed for the high cost of housing. The root of the problem lies in the fact that we have not built enough homes in the past fifty years, and the NIMBYism movement is partly to blame for this.
To address this issue, local governments must work on solutions to increase the number of properties available to house our growing population. This will require leadership that many elected officials may not possess. As concerned citizens, we can take action by contacting our local elected officials and expressing our dissatisfaction with the soaring prices of homes and rentals. It is crucial to clarify that the root of the problem is a lack of supply and that a different approach is needed to address the housing shortage in America.
If you have thoughts on the limited housing supply in America, please share them in the comments section below. Let's work together to find solutions to this critical issue.2023-03-20T03:00:00-07:002023-04-03T15:03:41-07:00Joe Manausatag:manausa.com,2012-09-20:34216Unlocking Zillow's Latest Housing Trends And Forecasts<img src="https://assets.site-static.com/userfiles/663/image/zillow-housing-report-february-2023.png" width="880" height="587" alt="Buckle up for a clear and concise update on the real estate market, and discover the truth for yourself with today's Zillow Housing Market Update" title="Zillow Housing Report February 2023" class="img_box_center" />
Are you tired of conflicting reports about the housing market? Look no further!
Zillow, the real estate giant with a wealth of timely data on the housing market, has shared its extensive data that we have used to generate our monthly housing market update.
Buckle up for a clear and concise report on the US real estate market, and discover the truth for yourself with today's Zillow Housing Market Update.<br /><br />
Numerous Metrics Required To Forecast Housing
If you want to understand the current housing market, relying on just one metric can be misleading and potentially inaccurate. While metrics such as home prices or inventory levels can give you a general idea of how the market is doing, they do not provide a complete picture of the complex and multifaceted housing market.
For example, home prices may be rising, but that does not necessarily mean that the market is healthy or that it is a good time to buy or sell. A rise in prices could be due to a shortage of inventory, low-interest rates, or high demand in certain areas. It could also indicate a speculative bubble that could burst at any moment.
In addition, other metrics such as housing starts, building permits, mortgage delinquency rates, and foreclosure rates can give valuable insight into the market. By examining multiple metrics, you can get a more comprehensive understanding of the housing market's trends, challenges, and opportunities.
For instance, if housing starts and building permits are declining while prices are increasing, it could signal a potential shortage of housing supply in the future. Similarly, if mortgage delinquency rates and foreclosure rates are rising, it could be an indication of financial stress among homeowners and potential risks for the overall market.
Overall, understanding the housing market requires a holistic approach that considers multiple metrics and data points. By doing so, you can gain a more accurate and nuanced understanding of the market, which can inform your decisions whether you are a homeowner, homebuyer, or real estate investor.
Today's report quickly examines 11 key metrics Zillow tracks, delivering a very solid housing market update.
Homebuyer Activity Continues To Slow
This graph reports Zillow's estimated number of unique properties sold each month, and it shows a 16-month trend has formed.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-unit-home-sales-february-20223.jpg" width="880" height="641" alt="Zillow's count of all US home sales February 2023" title="Zillow Unit Home Sales Graph February 2023" class="img_box_center" />
The blue bars plot the number of homes sold, while the yellow bars plot the year-over-year change in sales. When the yellow bars rise about the horizontal axis, unit sales grew. When the yellow bars fall below the horizontal axis, unit sales fell.
Sales through December 2022 show that home sales declined in the US for sixteen months. Year-over-year sales are an important metric because it removes the influence of seasonality by comparing the same months each year. For example, the number of homes sold in December 2022 was 38% fewer than in December 2021.
Though this graph only contains data since 2009, it's important to point out that the peak of home sales seen on the graph is far lower than the number of homes sold during the housing bubble formation from 2004 through 2006. I point this out as a reminder to our readers that recent years were not filled with the irrational exuberance of amped-up new investors that propped up the market more than fifteen years ago.
So why have home sales slowed for sixteen straight months?<br /><br />
Changing Mortgage Interest Rates Impact Demand
This graph plots the average 30-year fixed mortgage interest rate since 1971, where the most recent months shed light on one reason for the decline in home sales.
<img src="https://assets.site-static.com/userfiles/663/image/mortgage-interest-rates-graph-february-2023.jpg" width="880" height="641" alt="Average monthly mortgage interest rates February 2023" title="Recent Mortgage Interest Rates Graph February 2023" class="img_box_center" />
When I was preparing this graph in mid-February, I checked the Mortgage News Daily website, and it reported that the current rate was 6.8%, while the one-year-ago rate was 4.08%. Interest rates are 67% higher than a year ago, but I'm concerned about its recent rebound higher.
The average lender could offer 5.99% on a top-notch conventional 30yr fixed mortgage loan just two weeks ago. Today, that same lender would be closer to 6.8% (an increase of more than 13.5%).
This is an incredibly abrupt move at almost any other time in the past several decades. The only reason we're not freaking out is that this sort of volatility has been common at times over the past year. Moreover, the most recent highs saw rates well into the 7% range, so if we're still in the 6's, rising rate headlines don't have a ton of shock value.
So don't be shocked, but do be aware that rates are quickly closing in on 7% again.
But you must wonder, are rising mortgage rates the only culprit behind the cooling housing market? Think again. Shockingly, home sales started plummeting months before rates hit 3.3%. Home sales started to slide when mortgage interest rates were at record lows, so we cannot solely blame the current housing market woes on mortgage interest rates. In fact, home sales fell for six straight months where mortgage interest rates were below 4%, so there has to be more to declining home sales than just an increase in mortgage interest rates.
Readers who remember the housing collapse in 2006 might be concerned that the supply of homes for sale is rising out of control. That happened in 2006, as builders were in full production mode while buyers were expelled from the market when the government changed lending requirements. Declining demand and rising supply created the bubble that sent home prices plummeting. Is that what we should expect in 2023?
The next few graphs reveal another primary cause of declining home sales and expose the potential answer for the stability of home prices. Remember, one metric alone does not explain future moves in housing, we have to take in numerous data to get a clearer picture.<br /><br />The "Real Deal" On The Inventory Of Homes For Sale
The latest inventory report reveals a striking contrast between current and past real estate markets. Unlike in 2006, the number of unique listings available each month since the start of 2019 has taken a dramatic turn. Read on to discover the eye-opening details.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-inventory-of-homes-for-sale-graph-february-2023.jpg" width="880" height="641" alt="Zillow's inventory of US homes for sale February 2023" title="Zillow Inventory Of Homes For Sale Graph February 2023" class="img_box_center" />
In the graph above, the blue field plots the number of homes available each month, while the red line measures the year-over-year change in inventory. Look where the red line crosses the dashed-blue line in August 2019 and August 2022, when the market shifted from inventory growth to inventory reduction and then back to inventory growth.
There has been much talk about a rapid increase in inventory, but the actual 8% increase in listings is relatively small when compared to the over four million listings during the years of the housing bubble. Today, we have well-below one million homes listed, which is a stark contrast.
Those who expect the inventory to rise rapidly as sales plummet are not accounting for the source of new listings. With new construction inventory far lower than historical norms, we must rely on discretionary sellers to fulfill our inventory needs.
The problem with expecting inventory growth is that most discretionary sellers are discretionary buyers too. When a buyer opts out of the market due to affordability, it also means a discretionary seller is leaving.
Thus a buyer leaving the market results in a seller leaving the market in more than 50% of the cases. The move-up and move-down buyers have slowed, so inventory growth is not as many have anticipated.<br /><br />Monthly Inventory Of Listings
This graph offers an alternative perspective on the quantity of listings in the last four years, providing insight into the decrease in inventory volume.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-number-homes-for-sale-monthly-february-2023.jpg" width="880" height="641" alt="graph of US home sales by month and year ending February 2023" title="Number Home Sales By Month & Year February 2023" class="img_box_center" />
The graph above displays the black line, indicating last year's monthly influx of listings, and compares it with each of the three previous years. It's worth noting that there were only slightly more listings than in 2021, with the number of homes available for sale being 7% lower than in 2021, 9% lower than in 2020, and a significant 36% lower than in 2019. It's essential to remember that the inventory was also scarce in those years, so it's not that we have fewer homes than normal; fewer homes were available in very lean years.
Today, the number of listings is far lower than in recent years, and all four years shown were sellers' markets, where the number of listings was far too few for the demand in the market. Demand will have to go far lower to create the supply and demand dynamic that will cause home prices to fall for an extended period. There will be markets with declining home prices because they have declining populations. Still, most US housing markets have a supply void that has slowed buyer activity, even when mortgage interest rates were below 3%.<br /><br />Incoming Inventory Still Too Low
This graph plots the number of new listings entering the market each month for the past four years, and today is slower than ever.
<img src="https://assets.site-static.com/userfiles/663/image/new-listings-last-month-zillow-february-2023.jpg" width="880" height="641" alt="Graph of new listings in the US for February 2023" title="New Listings Last Month February 2023" class="img_box_center" />
Although many national news media outlets predict a home price crash, the inventory is decreasing. The supply needs to exceed demand to witness a significant decline in prices. However, the graph reveals that the supply decreases at a similar rate or even faster than the demand. Therefore, it is safe to say that there is no indication of a growing supply issue at this time.
In fact, due to the scarcity of supply, there will be added pressure on home prices. So, as of Zillow's most recently released data, it is reasonable to conclude that home prices will not decline significantly in most local US housing markets.<br /><br />Home Price Growth Is Slowing
Let's look at what Zillow reports about the median US home price.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-price-graph-february-2023.jpg" width="880" height="641" alt="Zillow's measure of the median home list price February 2023" title="Zillow Median Home Price Graph February 2023" class="img_box_center" />
The blue field in the graph shows the median list price, while the red line shows Zillow's estimate of the median home sales price during the same period.
The blue field shows a seasonal pattern on the median list price, with prices starting low at the beginning of the year, moving higher during the summer, and then falling slightly towards the end of the year. I'm seeing reports of "list prices dropping." Of course, they are! The median list price falls at this time every year! Where were those reports in the last six years when asking prices declined in the latter part of each year?
This graph reveals two things. First, home prices generally rise, so it makes sense that end-of-year asking prices are higher than at the beginning of the year. Second, sellers who tried too high of an asking price earlier in the year ultimately reduce their prices to get sold before the end of the year. Remember, a homeowner can ask any price they like, but to get sold, they have to meet the market at the right price.
The red line shows there is no actual inner-year cycle for prices; home prices generally rise. The median home sales price had been rising faster for the past few years, but the declining number of sales has flattened to where prices are growing at more "normal" rates (the average home price growth over the past 80 years is 5.2% annually).
Additionally, one must remember that with higher rates, home affordability falls. Does the slowing growth rate of the median home price mean that home value growth is receding, or does it mean that buyers are purchasing cheaper homes?<br /><br />Zillow Expects Slower US Home Home Price Growth
This graph estimates the median home price in the US by considering the typical price for various types of homes, including single-family homes, condominiums, and co-ops.
But this graph is unique because it focuses on the middle third of the market, analyzing homes that fall between the 35th and 65th percentile. By examining this range of properties, the graph accurately reflects the median home price over time, giving you unparalleled insight into US home prices.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-value-index-february-2023.jpg" width="880" height="641" alt="Zillow's Graph Of The Median Home Price February 2023" title="Zillow Median Home Value Index February 2023" class="img_box_center" />
If you look closely at this graph, you'll see that Zillow has reported home values from 2000 through 2023 because their dataset includes past data plus a forecast that home values will rise 1.2% over the next twelve months.
Just as a reference to how conservative Zillow's estimate has become, it estimated 17.3% annual growth back in January last year.
Zillow's Home Value Index sheds light on the alarming decrease in home affordability. According to Zillow's estimates, the median home price has surged by over 118% since February 2012, with an annual growth rate of 7.5%.
Comparing the rate of home price growth over the past two years to the rate during the housing bubble paints a concerning picture. The steepness of the slope highlights the acceleration of the increase in prices, which is a cause for concern in terms of the affordability of homes.
But Zillow is not the only real estate platform predicting home price growth.
CoreLogic Is Bullish On Home Prices Too
<img src="https://assets.site-static.com/userfiles/663/image/corelogic-home-price-forecast-february-2023.jpg" alt="CoreLogic Home Price Forecast Graph February 2023" title="Corelogic Home Price Forecast Chart" class="img_box_center" width="880" height="641" />
CoreLogic, another national real estate web portal, believes home prices will grow by 3% over the next year, nearly triple Zillow's growth forecast.
One must always remember that the supply and demand dynamic for homes is the key driver for the change in home prices. It does not matter that we have observed a historic run-up in prices. Instead, we must be concerned about the low production of homes that has created this problem.
The abysmally low supply of homes for sale has caused home prices to soar, and as we will see in our next graph, home prices are growing in 98.9% of the markets in Zillow's report.<br /><br />Home Prices Falling "Everywhere!" ???
Are you one of those people who are rooting for falling home prices? Well, hold on to your seats because you're in for a shock! This graph reveals that reports of falling home prices should be limited to just 10 cities!
<img src="https://assets.site-static.com/userfiles/663/image/year-over-year-home-price-change-february-2023.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth February 2023" title="Year-Over-Year Home Price Changes February 2023" class="img_box_center" />
Of the 884 cities reported by Zillow, 874 posted growth in home prices for the past twelve months. Only ten markets reported declines:
Garderville Ranchos, NV Down 1/3rd of 1%
Red Bluff, CA Down 1/2 of 1%
Carson City, NV Down 1/2 of 1%
Fernley, NV Down 2.3%
Grants Pass, OR Down 2.7%
Shelton, WA Down 2.9%
Coeur D'Alene, ID Down 4%
Boise City, ID Down 4.2%
Fairbanks, AK Down 8.5%
Minot, ND Down 10.1%
Zillow has reported an 11% year-over-year increase in home prices in the US since December 2021, but it's understandable that some of our readers may have heard different news. To delve deeper into the issue, let's explore why there are conflicting reports about declining home prices.<br /><br />Month-Over-Month Home Prices: Growing In 57% Of US Markets
The following graph highlights the US markets that have experienced the highest month-over-month change in home prices.
<img src="https://assets.site-static.com/userfiles/663/image/month-over-month-home-price-change-february-2023.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth February 2023" title="Month-Over-Month Home Price Changes February 2023" class="img_box_center" />
Of the 889 cities reported by Zillow, 505 (57%) posted growth in home prices in December, while 384 markets (43%) reported declines. Perhaps this is why we're inundated with reports of declining home prices.
If you've been following my recent reports on US home prices, you might have noticed that median home prices typically increase in a staggered manner throughout the year (or decrease in declining markets). It's premature to identify a trend in price changes after just a few months, as doing so would have resulted in reporting declines in each of the past five years, despite the fact that median home prices were actually on the rise during those years.
It is clear that the rate of growth for home prices is coming down, but it remains too early to say that we expect home prices to fall annually in most US housing markets. With nearly 99% of markets reporting annual gains and 56% showing monthly gains, the market is clearly appreciating.
When you see reports calling for a 30%, 40%, or even 50% decline in home prices, you have to wonder what data leads them to that conclusion. It seems to me that most reporters are suffering from recency bias and each could learn a lot from the video shown below.<br /><br />Rents: The Litmus Test For Home Prices
Our final graph in today's report plots the change in the median rental rate. We use the change in rents to affirm or refute reports on the overall supply of homes in the US. When supply is low (in both the for-rent and the for-sale markets), both prices and rents rise. The opposite is true when supply is high. So when rents and prices move in the same direction, it often means a supply imbalance.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-graph-observed-rent-index-february-2023.jpg" width="880" height="641" alt="Zillow's measurement of the change in rental rates February 2023" title="Zillow Observed Rent Index Graph February 2023" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
In the graph above, the blue area measures the monthly rental rate index (median rent), while the red line plots each month's year-over-year percentage change. Pay close attention to the rapid growth shown in red.
After peaking at more than a 17% annual growth rate in February, rents have "only" grown by 7.4% over the past twelve months.
Just as the inventory of homes for sale declined, so too has the number of homes for rent. People who must move today have no good choice between buying versus renting a home. The cost for each has exploded higher, though each is rising slower than the rates observed at the beginning of the year.
How is this for perspective? In December, the median rental rate of $1.981 was 25% higher than the median rental rate of $1,585 recorded two years ago in December 2020. This is important to understand because it is not just home prices that have become unaffordable but also rental rates. I often receive comments from viewers on our <a href="https://www.youtube.com/channel/UC91JHHJm-D8cFDeXR1RQIBA" title="Joe Manausa Real Estate On YouTube">YouTube Channel</a> saying they are waiting for home prices to fall. I certainly understand the sentiment, but I have to wonder, where are they living while they await home price declines?
Are they waiting in a rental property where their lease renewal will be 25% higher than two years ago? Or are they waiting in a home they own? If they are right and home prices drop, won’t the home they own drop too? This means they’ll sell cheaper to buy cheaper! So what’s the point in waiting? That’s the trouble with trying to time the housing market; either way, you’ll pay more.
The fact that both rents and prices are moving higher together confirms that the supply of homes in the US is insufficient to house our growing population. Overall, when supply is insufficient to fulfill demand, prices rise. Until we see significant output from US home builders, we anticipate rising prices (and rents). There will be markets where the supply of homes outpaces demand, but overall, the US housing market remains undersupplied.<br /><br />A Home Affordability Crisis
Home affordability is a pressing issue today. When people get priced out of the "for sale" market, they can no longer turn to the "for rent" market, as they will be priced out of that too!
When home prices crashed after the housing bubble, rents kept moving higher. That was a sign that we failed to interpret correctly, as it was a signal that despite the large inventory of homes for sale, there were not "too many" homes built in America.
The imbalance in housing inventory was caused by a sharp drop in demand for homes that were for sale. This drop in demand was partly due to the government's intervention in the housing market. The government made it much harder for borrowers to qualify for loans, which meant that only the wealthiest buyers could afford to buy a home.
The government was concerned about the housing market getting out of control, so they raised the bar for loan qualifications to unprecedented levels. As a result, many would-be buyers were forced to rent instead. The demand for rental properties increased, rental rates continued higher, even as home prices fell.
Loan qualification standards are not an issue today. The entirety of the housing crisis lies on the inventory side, so local governments must work to solve the lack of shelter problem. Many think that mortgage interest rates are to blame, but we must concede that rates are still low (21% lower than the fifty-year average).
Inventory issues will not go away silently. We have not built enough homes in the past fifty years, and much of the blame rests on the shoulders of the <a href="https://www.youtube.com/watch?v=9jOtFZ8sNWg" title="Who To Blame For Soaring Home Prices" data-uw-rm-brl="exc">NIMBYism</a> movement. Opposition to smart, controlled development must be quelled, and we must find solutions to increasing the number of properties to house our growing population. The problem is simple to define but very difficult to cure. It will take a level of leadership that most elected officials do not possess.
If you're concerned about the high cost of housing in our country, there are steps you can take to help fix the problem. One important action is to contact your local elected officials and express your dissatisfaction with the soaring prices of homes and rentals. Make it clear that the root of the problem is a lack of supply and that a different approach is needed to address the housing shortage in America. By doing so, you can help bring attention to this issue and encourage leaders to take action that will benefit the community.
If you have thoughts on the limited housing supply in America, please share them in the comments section below.2023-02-20T04:00:00-07:002023-02-27T15:53:18-07:00Joe Manausatag:manausa.com,2012-09-20:32809Zillow Said What? Here's Zillow's End-Of-The-Year Take On Home Sales<img src="https://assets.site-static.com/userfiles/663/image/zillow-end-of-the-year-on-home-sales-december-2022.jpg" width="880" height="587" alt="US housing market update from Zillow December 2022" title="Zillow Housing Market Report December 2022" class="img_box_center" />
Zillow has something to say about the housing market, and it is a message reinforced with data accumulated by its massive real estate marketing machine. It's also supported by data from other sources too.
While many social media commentaries proclaim falling home prices and declining home sales, Zillow's data is clear about what is happening. Zillow is not my only source of data on the housing market, but I like to review its findings each month as Zillow is always quick to report and often months ahead of many other real estate market data portals.
Long-time readers of our blog know that we obtain housing data from numerous sources on the internet to provide a broad, unbiased view of housing market conditions, so if this is your first visit to the Tallahassee Real Estate Blog and think that I'm giving credence to Zillow or its business model, that is not the case, it is just Zillow's turn in our reporting cycle.
Today's Zillow Housing Market Update paints a clear picture that refutes what many mainstream and social media pundits have to say about the real estate market.<br /><br />
Homebuyer Activity Continues To Slow
This graph reports Zillow's estimated number of unique properties sold each month, and it shows a 14-month trend has formed.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-annual-home-sales-graph-december-2022.jpg" width="880" height="641" alt="Zillow's count of all US home sales December 2022" title="Zillow Unit Home Sales Graph December 2022" class="img_box_center" />
The blue bars plot the number of homes sold, while the yellow bars plot the year-over-year change in sales. When the yellow bars rise about the horizontal axis, unit sales grew. When the yellow bars fall below the horizontal axis, unit sales fell.
Sales through October show that for fourteen straight months, home sales declined in the US. Year-over-year sales are an important metric because it removes the influence of seasonality by comparing the same months each year. For example, the number of homes sold in October 2022 was 24% fewer than the number of homes sold in October 2021.
Though this graph only contains data since 2009, it's important to point out that the peak of home sales seen on the graph is far lower than the number of homes that were sold during the housing bubble formation back in 2004 through 2006. I point this out as a reminder to our readers that recent years were not filled with the irrational exuberance that propped up the market more than fifteen years ago.
So why have home sales slowed for fourteen straight months?<br /><br />
Mortgage Interest Rates Impact Home Affordability
This graph plots the average 30-year fixed mortgage interest rate since 1971, where the most recent months shed light on one reason for the decline in home sales.
<img src="https://assets.site-static.com/userfiles/663/image/mortgage-rates-december-2022.jpg" width="880" height="641" alt="Average monthly mortgage interest rates December 2022" title="Recent Mortgage Interest Rates Graph December 2022" class="img_box_center" />
When I was preparing this graph in early December, I checked the Mortgage News Daily website, and it reported that the current rate was 6.37%, while the one-year-ago rate was 3.25%. Interest rates are nearly double a year ago, but we've seen a 13% decline over the past thirty days.
Rising mortgage interest rates have cooled buyer demand, but can we solely blame the decline in home sales on the rise of mortgage interest rates? Here's something you don't hear from most people reporting on the housing market: Interest rates did not move above 3.3% until January of this year, yet year-over-year home sales started to slide back in September of 2021 (and those sales were fueled by sub-3% mortgage interest rates in August 2021).
Home sales started to slide when mortgage interest rates were at record lows, so we cannot solely blame the current housing market woes on mortgage interest rates. In fact, home sales fell for six straight months where mortgage interest rates were below 4%, so there has to be more to declining home sales than just an increase in mortgage interest rates.
Readers who remember the housing collapse in 2006 might be concerned that the supply of homes for sale is rising out of control. That happened in 2006, as builders were in full production mode while buyers were expelled from the market when the government changed lending requirements. Declining demand and rising supply created the bubble that sent home prices plummeting. Is that what we should expect in 2023?
The next few graphs reveal another primary cause of declining home sales and expose the potential answer for the stability of home prices.<br /><br />Why The Inventory Of Homes For Sale Is Not Growing
Zillow reports the number of unique listings active in each given month since the beginning of 2019, and what they are reporting is very different than what we saw in 2006.
<img src="https://assets.site-static.com/userfiles/663/image/real-estate-inventory-graph-zillow-december-2022.jpg" width="880" height="641" alt="Zillow's inventory of US homes for sale December 2022" title="Zillow Inventory Of Homes For Sale Graph December 2022" class="img_box_center" />
In the graph above, the blue field plots the number of homes available each month, while the red line measures the year-over-year change in inventory. Look where the red line crosses the dashed-blue line in August 2019 and August 2022, when the market shifted from inventory growth to inventory reduction and then back to inventory growth.
I have seen a lot of discussion about the anticipation of inventory growth. However, the 1% rise in listings is a minuscule amount, considering there were more than four million listings during the housing bubble years, yet today we're barely above one million homes.
Those who expect the inventory to rise rapidly as sales plummet are not accounting for the source of new listings. With new construction inventory far lower than historical norms, we must rely on discretionary sellers to fulfill our inventory needs.
The problem with expecting inventory growth is that most discretionary sellers are discretionary buyers too. When a buyer opts out of the market due to affordability, it also means a discretionary seller is leaving.
Thus a buyer leaving the market results in a seller leaving the market in more than 50% of the cases. The move-up and move-down buyers have slowed, so inventory growth is not as many have anticipated.<br /><br />Another View Of The Inventory Of Listings
This graph shows a different view of the number of listings over the past four years that sheds light on the volume reduction in inventory.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-number-homes-for-sale-december-2022.jpg" width="880" height="641" alt="graph of US home sales by month and year ending December 2022" title="Number Home Sales By Month & Year" class="img_box_center" />
The black line in the graph above plots the number of listings that entered the market each month this year. Note that there are only (slightly) more listings than last year; the number of homes for sale remains 1% lower than last year, 14% lower than two years ago, and a whopping 36% lower than three years ago. It's important to remember that those years were inventory deficient as well.
Today, the number of listings is far lower than in recent years, and all four years shown were sellers' markets, where the number of listings was far too few for the demand in the market. Demand will have to go far lower to create the supply and demand dynamic that will cause home prices to fall for an extended period. There will be markets with declining home prices because they have declining populations. Still, most US housing markets have a supply void that has slowed buyer activity, even when mortgage interest rates were below 3%.<br /><br />New Inventory Still Slowing
This graph plots the number of new listings entering the market each month for the past four years, and today is slower than ever.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-new-listings-december-2022.jpg" width="880" height="641" alt="Graph of new listings in the US for December 2022" title="New Listings Last Month" class="img_box_center" />
Even as many national news media report that home prices will crash and burn, we see the inventory drop. The only way we'll see major price declines is for supply to outrace demand, but this graph clearly shows that supply is dropping in line (or even faster) with demand.
As of today, it is safe to report that there is no sign of a growing-supply problem. Instead, the lack of supply will put further pressure on home prices.<br /><br />Median List Price Cooling
This graph plots the median prices at which homes across the US were listed and sold.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-list-price-december-2022.jpg" width="880" height="641" alt="Zillow's measure of the median home list price December 2022" title="Zillow Median Home Price Graph December 2022" class="img_box_center" />
The blue field in the graph shows the median list price, while the red line shows Zillow's estimate of the median home sales price during the same period.
The blue field shows a seasonal pattern on the median list price, with prices starting low at the beginning of the year, moving higher during the summer, and then falling slightly towards the end of the year. I'm seeing reports of "list prices dropping." Of course they are! The median list price falls at this time every year! Where were those reports in each of the last five years when asking prices declined in the latter part of each year?
This graph reveals two things. First, home prices generally rise, so it makes sense that end-of-year asking prices are higher than at the beginning of the year. Second, sellers who tried too high of an asking price earlier in the year ultimately reduce their prices to get sold before the end of the year. Remember, a homeowner can ask any price they like, but to get sold, they have to meet the market at the right price.
The red line shows there is no actual inner-year cycle for prices; home prices generally rise. The median home sales price had been rising faster for the past few years, but the declining number of sales has flattened to where prices are growing at more "normal" rates (the average home price growth over the past 80 years is 5.2% annually).
Additionally, one must remember that with higher rates, home affordability falls. Does the slowing growth rate of the median home price mean that home value growth is receding, or does it mean that buyers are purchasing cheaper homes?<br /><br />Zillow Expects US Home Price Growth To Slow Down
This graph is Zillow's estimate of the median home price, measuring the typical home price for single-family homes, condominiums, and co-ops in the United States. It reflects the typical price of homes in the 35th to 65th percentile. In other words, it approximates the median by swiping the middle third of the market and analyzing it over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-december-2022.jpg" width="880" height="641" alt="Zillow's Graph Of The Median Home Price December 2022" title="Zillow Median Home Value Index December 2022" class="img_box_center" />
If you look closely at this graph, you'll see that Zillow has reported home values from 2000 through October of next year because their dataset includes past data plus a forecast that home values will rise 1.2% over the next twelve months. Just as a reference to how conservative Zillow's estimate has become, it estimated 17.3% annual growth back in January (ten months prior).
Zillow’s Home Value Index provides a great perspective on the toxic decline in home affordability. Zillow estimates the median home price has risen more than 91% since February 2012 (an annual growth rate of 6.3%). When we compare the slope of home price growth over the past two years to the slope of price growth during the housing bubble, it is a disturbing image.
CoreLogic Is More Bullish Than Zillow
<img src="https://assets.site-static.com/userfiles/663/image/core-logic-home-price-forecast-dec-2022.jpg" alt="CoreLogic Is More Bullish Than Zillow" title="Corelogic Home Price Forecast" class="img_box_center" />
While preparing this report, I found the graph above on Twitter and added it for perspective. Corelogic believes home prices will grow by more than 4% over the next year, a level greater than three times the Zillow forecast.
One must remember that the supply and demand dynamic for homes is the key driver for the change in home prices. Today's abysmally low supply of homes has caused home prices to soar, and as we will see in our next graph, home prices are growing in 99.7% of the markets in Zillow's report.<br /><br />Year-Over-Year Home Price Growth Continues
With so many people claiming (or perhaps hoping for) falling home prices, I'm wondering if they are even monitoring what is going on across the US. This graph reports all metropolitan markets where the year-over-year change in home prices grew by 25% or more!
<img src="https://assets.site-static.com/userfiles/663/image/zillow-year-over-year-home-price-change-december-2022.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth" title="Year-Over-Year Home Price Changes" class="img_box_center" />
Of the 893 cities reported by Zillow, 890 posted growth in home prices for the past twelve months. Only three markets reported declines:
Boise City, ID Down 3.2%
Fairbanks, AK Down 6.8%
Minot, ND Down 8.1%
Overall, Zillow reports the year-over-year home price in the US has risen 13.5% since October 2021, but I'm sure some of our readers will want to say, "that's not what I'm hearing elsewhere," so let's dig a little deeper into why we're seeing so many reports of falling home prices.<br /><br />Month-Over-Month Home Prices Growing In Two-Thirds Of US Markets
This graph reports the US markets where the month-over-month change in home prices was the highest.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-month-over-month-home-price-change-december-2022.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth last month" title="Month-Over-Month Home Price Changes" class="img_box_center" />
Of the 893 cities reported by Zillow, 761 (85.2%) posted growth in home prices for the past month, while 132 markets (14.8%) reported declines. Perhaps this is why we're inundated with reports of declining home prices.
If you have seen some of my recent reports on US home prices, then you know that it is common for the median home price to stagger step higher throughout the year (or stagger step lower in a declining market). We really can't call price change trends after a few months because if we did, we would have reported declines in each of the past five years (years when the median home price soared).
It is clear that the rate of growth for home prices is coming down, but it is too early to say that we expect home prices to fall annually in most US housing markets. With 99% of markets reporting annual gains and 85% showing monthly gains, the market is clearly appreciating.<br /><br />
Rental Rate Growth Is Cooling Too
The final graph in today's Zillow Housing Report measures what Zillow refers to as the "typical observed market rental rate" and, like its Home Value Index, takes a swipe from the middle of market rents to approximate the median rental rate over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-observed-rent-index-graph-december-2022.jpg" width="880" height="641" alt="Zillow's measurement of the change in rental rates December 2022" title="Zillow Observed Rent Index Graph December 2022" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
The blue area measures the rental rate index each month (median rent), while the red line plots the year-over-year percentage change each month.
After peaking at more than a 17% annual growth rate in February, rents have "only" grown by 9.6% over the past twelve months.
Just as the inventory of homes for sale declined, so too has the number of homes for rent. People who must move today have no good choice between buying versus renting a home. The cost for each has exploded higher, though each is rising slower than the rates observed at the beginning of the year.
In October, the median rental rate of $2,040 was nearly 10% higher than the median rental rate of $1,861 recorded in October 2021. This is important to understand because it is not just home prices that have become unaffordable, so too have rental rates. I often receive comments from viewers on our <a href="https://www.youtube.com/channel/UC91JHHJm-D8cFDeXR1RQIBA" title="Joe Manausa Real Estate On YouTube">YouTube Channel</a> saying they are waiting for home prices to fall. I certainly understand the sentiment, but I have to wonder, where are they living while they await home price declines?
Are they waiting in a rental property where their lease renewal will be 10% higher this year after rising even greater last year? Or are they waiting in a home they own? If they are right and home prices drop, won’t the home they own drop too? This means they’ll sell cheaper to buy cheaper! So what’s the point in waiting? That’s the trouble with trying to time the housing market; either way, you’ll pay more.
The fact that both rents and prices are moving higher together confirms that the supply of homes in the US is insufficient to house our growing population. Overall, when supply is insufficient to fulfill demand, prices rise. Until we see significant output from US home builders, we should continue to anticipate rising prices (and rising rents). There will be markets where the supply of homes outpaces demand, but overall, the US housing market remains undersupplied.<br /><br />Home Affordability Crisis Continues
Home affordability is a pressing issue today. When people get priced out of the "for sale" market, they can no longer turn to the "for rent" market, as they will be priced out of that too!
When home prices crashed after the housing bubble, rents kept moving higher. That was a sign that we failed to interpret correctly, as it was a signal that despite the large inventory of homes for sale, there were not "too many" homes built in America.
The plummeting demand in the for-sale market that created the inventory imbalance was manufactured by government involvement that took away loan options for nearly all but the wealthiest of borrowers. Loan qualification standards were pushed far higher than ever in the past by a government intent on slowing a perceived "out of control" housing market.
Loan qualification standards are not an issue today. The entirety of the housing crisis lies on the inventory side, so local governments must work to solve the lack of shelter problem. The rise and dominance of the <a href="https://www.youtube.com/watch?v=9jOtFZ8sNWg" title="Who To Blame For Soaring Home Prices" data-uw-rm-brl="exc">NIMBYism</a> movement must be quelled, and we need to find solutions to increasing the number of properties to house our growing population. The problem is simple to define but very difficult to cure. It will take a level of leadership that most elected officials do not possess.<br />
You can do your part to fix our housing problems. Reach out to your local elected officials and tell them that you are not OK with soaring home prices and rents. Let them know it is purely a supply-side issue, one that requires a different plan of attack if we are to cure the shelter imbalance in America.
If you have thoughts on the limited housing supply in America, please share them in the comments section below.2022-12-12T04:00:00-07:002022-12-27T09:05:55-07:00Joe Manausatag:manausa.com,2012-09-20:31857Zillow Exposes Mainstream Media On Home Prices<img src="https://assets.site-static.com/userfiles/663/image/zillow-housing-market-update-oct-2022.jpg" width="880" height="587" alt="US housing market update from Zillow" title="Zillow Housing Market Report October 2022" class="img_box_center" />
Home prices are crashing! Wait, no, I heard that home prices are rising. What's going on in this crazy housing market?
In order to dig into what's going on in housing, I've spent some time gathering data from the Zillow website. This is something I do regularly. Zillow, by no means, is not my only source of data from the housing market, but it is the quickest available each month. Long-time readers of our blog know that we obtain housing data from numerous sources around the internet to provide a broad, unbiased view of housing market conditions, so if you are new here and think that I'm giving credence to Zillow or its business model, you can be assured that it's "just their turn" in our reporting cycle.
Today's Zillow Housing Market Update will show you that the mainstream media has inaccurately reported on home prices and conditions are not what they seem.<br /><br />
Demand Has Fallen For US Homes
This graph makes it clear that demand in the for-sale market is declining. It reports Zillow's estimated number of unique properties sold each month.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-unit-home-sales-graph-october-2022.jpg" width="880" height="641" alt="Zillow's count of all US home sales October 2022" title="Zillow Unit Home Sales Graph October 2022" class="img_box_center" />
The blue bars plot the number of homes sold, while the yellow bars plot the year-over-year change in sales. When the yellow bars rise about the horizontal axis, unit sales have grown. When the yellow bars fall below the horizontal axis, unit sales have declined.
Sales through September show that for thirteen straight months, home sales have declined in the US. This is non-seasonal information, as each month's change compares to the same month in the year prior. For example, the number of homes sold in September 2022 was 27% fewer than the number of homes sold in September 2021.
I don't think anybody would be surprised to discover why home sales are declining.<br /><br />
Mortgage Interest Rates Have Exploded Higher
This graph plots the average 30-year fixed mortgage interest rate since 1971, and the most recent months might shed some light on the decline in home sales.
<img src="https://assets.site-static.com/userfiles/663/image/mortgage-interest-rates-history-october-2022.jpg" width="880" height="641" alt="Average monthly mortgage interest rates October 2022" title="Recent Mortgage Interest Rates Graph October 2022" class="img_box_center" />
When I was preparing this graph in mid-October, I checked the Mortgage News Daily website, and it reported that the current rate was 7.16%, while the one-year-ago rate was 3.16%. Never before have mortgage rates moved so high, so fast. We've seen a 127% increase in mortgage interest rates in just one year! What’s truly crazy is that despite the large leap in interest rates, today’s rate remains below the fifty-year average.
Rising mortgage interest rates have cooled buyer demand, and viewers who remember the housing collapse in 2006 might be concerned that the supply of homes for sale is rising out of control. That happened in 2006, as builders were in full production mode while buyers were expelled from the market when the government changed lending requirements. Declining demand and rising supply created the bubble that sent home prices plummeting.
The next few graphs will help us understand the similarities and differences between today's housing market versus what we experienced in 2006.<br /><br />Small Growth In The Inventory Of Homes For Sale
In this graph, Zillow reports the number of unique listings active in each given month since the beginning of 2019.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-homes-for-sale-inventory-october-2022.jpg" width="880" height="641" alt="Zillow's inventory of US homes for sale October 2022" title="Zillow Inventory Of Homes For Sale Graph October 2022" class="img_box_center" />
The blue field plots the number of listings, while the red line measures the year-over-year change in inventory. Look where the red line crosses the dashed-blue line two months ago, as that is when the market shifted from inventory reduction to inventory growth.
I have seen a lot of discussion about inventory growth, but the 1% rise in our listings is an insignificant amount, considering how low the current supply of homes remains. There were more than 4 million listings during the housing bubble years, yet today we're barely above 1 million homes.
One might expect the inventory to rise rapidly as sales have plummeted, but remember, when a buyer opts out of the market due to affordability, it often is a buyer who would also have a home to sell. Thus a buyer leaving the market results in a seller leaving the market in roughly 50% of the cases. The move-up and move-down buyers have slowed, so inventory growth is not as many would expect.<br /><br />Median List Price Continues Rising
This graph plots the median prices at which homes across the US were listed and sold. Note that both are rising.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-price-october-2022.jpg" width="880" height="641" alt="Zillow's measure of the median home list price October 2022" title="Zillow Median Home Price Graph October 2022" class="img_box_center" />
The blue field in the graph shows the median list price, while the red line shows Zillow's estimate of the median home sales price during the same period.
The blue field shows a seasonal pattern on the median list price, with prices starting low at the beginning of the year, moving higher during the summer, and then falling slightly towards the end of the year. Interestingly, we've not seen a decline yet in 2022. I'm seeing reports of "list prices dropping." Where were those reports in each of the last five years when asking prices declined in the latter part of each year?
This graph reveals two things. First, home prices generally rise, so it makes sense that end-of-year asking prices are higher than at the beginning of the year. Second, sellers who tried too high of an asking price earlier in the year end up dropping their prices to get sold before the end of the year. Remember, a homeowner can ask any price they like, but to get sold, they have to meet the market at the right price.
The red line shows that there is no actual inner-year cycle for prices, they just generally rise. The red line had been rising faster of late, but the declining number of sales has flattened to where prices are growing at more "normal" rates (the average home price growth over the past 80 years is 5.2% annually).<br /><br />US Home Price Growth Is Cooling
This graph is Zillow's estimate of the median home price, measuring the typical home price for single-family homes, condominiums, and co-ops in the United States. It reflects the typical price of homes in the 35th to 65th percentile. In other words, it approximates the median by swiping the middle third of the market and analyzing it over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-october-2022.jpg" width="880" height="641" alt="Zillow's Graph Of The Median Home Price October 2022" title="Zillow Median Home Value Index October 2022" class="img_box_center" />
If you look closely at this graph, you'll see that Zillow has reported home values from 2000 through September of next year because their dataset includes past data plus a forecast that home values will rise 1.4% over the next twelve months. Just as a reference to how conservative Zillow's estimate has become, it estimated 17.3% annual growth back in January (nine months prior).
Zillow’s Home Value Index provides a great perspective on the toxic decline in home affordability. When we compare the slope of home price growth over the past two years to the slope of price growth during the housing bubble, it is an alarming image.
One must remember, however, that the supply and demand dynamic for homes is the key driver for the change in home prices. Today's abysmally low supply of homes has caused home prices to soar, and as we will see in our next graph, home prices are growing in 99.7% of the markets in Zillow's report.<br /><br />Rental Rates Continue To Move Higher
The final graph in today's Zillow Housing Report explains while there is no housing bubble, the housing market is in worse shape than it was during the housing bubble years. It measures what Zillow refers to as the "typical observed market rental rate" and, like its Home Value Index, takes a swipe from the middle of market rents to approximate the median rental rate over time.
<img src="https://assets.site-static.com/userfiles/663/image/rental-rate-growth-us-October-2022.png" width="880" height="641" alt="Zillow's measurement of the change in rental rates October 2022" title="Zillow Observed Rent Index Graph October 2022" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
The blue area measures the rental rate index each month (median rent), while the red line plots the year-over-year percentage change each month. It is this red line that is disturbing.
As the inventory of homes for sale has declined, so has the inventory of homes for rent. People who must move today have no good choice between buying versus renting a home. The cost for each has exploded higher.
In September, the median rental rate of $2,084 was nearly 11% higher than the median rental rate of $1,882 recorded in September 2021. Can you imagine if your monthly rent was increased from $1,900 to over $2,100 per month? If the rate remains the same over the next year, the median unit will rent for $2,300 per month, a rent hike of more than $400 monthly in just two years!
The only good news to report on rents is that the growth rate is slowing (albeit to a double-digit rate).
I often receive comments from viewers on our <a href="https://www.youtube.com/channel/UC91JHHJm-D8cFDeXR1RQIBA" title="Joe Manausa Real Estate On YouTube">YouTube Channel</a> saying they are waiting for home prices to fall. I certainly understand the feeling, but I have to wonder, where are they living while waiting?
Are they waiting in a rental property where their lease renewal will be 11% higher this year after rising about the same last year? Or are they waiting in a home they own? If they are right and home prices drop, won’t the home they own drop too? This means they’ll sell cheaper to buy cheaper! So what’s the point in waiting? That’s the trouble with trying to time the housing market, either way, you’ll pay more.
The fact that both rents and prices are moving higher together confirms that the supply of homes in the US is insufficient to house our growing population. Overall, when supply is insufficient to fulfill demand, prices rise. Until we see significant output from US home builders, we should continue to anticipate rising prices (and rising rents). There will be markets where the supply of homes outpaces demand, but overall, the US housing market remains undersupplied.<br /><br />Zillow Confirms Home Affordability Crisis
The previous graph is the smoking gun that lets us know just how toxic home affordability has become. When people get priced out of the "for sale" market, they can no longer turn to the "for rent" market, as they will be priced out of that too!
Most people do not realize that when home prices crashed after the housing bubble, rents kept moving higher. That was a sign that we did not interpret correctly, as it was a signal that despite the large inventory of homes for sale, there were not "too many" homes built in America.
The plummeting demand that caused the inventory imbalance was caused by government involvement that took away loan options for nearly all but the wealthiest of borrowers. Loan qualification standards were pushed far higher than ever in the past by a government intent on slowing a perceived "out of control" housing market.
Since the bubble burst, we have seen a significant slowdown in the number of residential units built to house our growing population. With the rise in <a href="https://www.youtube.com/watch?v=9jOtFZ8sNWg" title="Who To Blame For Soaring Home Prices">NIMBYism</a>, it has become very difficult to build and develop the shelter our population requires. Additionally, inflation has pushed the cost of new construction to a level where the median home buyer cannot be served.
The more that I read, and the more that I study housing data from various sources, the more I am convinced we are rapidly heading towards a renter nation. In an industry where there has never been centralized control of home prices and rental rates, I am concerned that we'll begin to see home prices and rental rates dictated by Wall Street giants as they consume much of the inventory in the future.
This should not be a surprise to anybody who has followed the growth of Amazon. It has eaten up and spit out local businesses as it expanded its reach across numerous industries. The "Mom And Pop" businesses have struggled to stay alive, many of which have closed down. Is there any industry more "Mom And Pop" than housing? I fear thirty years from now, we'll look back and see the same fate has hit housing as some new "Amazon" controls the housing market in all but the least-populated locales.
If you feel like I'm overreacting or you have ideas for a different outcome, I welcome your comments below.<br /><br />Year-Over-Year Home Price Change By Market
This graph reports all US markets where the year-over-year change in home prices grew by 25% or more!
<img src="https://assets.site-static.com/userfiles/663/image/year-over-year-home-price-changes-oct-2022.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth" title="Year-Over-Year Home Price Changes" class="img_box_center" />
Of the 894 cities reported by Zillow, 891 posted growth in home prices for the past twelve months. Only 3 markets reported declines:
Boise City, ID Down 1.6%
Fairbanks, AK Down 6.6%
Minot, ND Down 7.8%
Overall, Zillow reports the year-over-year home price in the US has risen 14.9% since September 2021, but I'm sure some of our readers will want to say, "that's not what I'm hearing elsewhere," so let's dig a little deeper into why we're seeing so many reports of falling home prices.<br /><br />Month-Over-Month Home Price Change By Market
This graph reports the US markets where the month-over-month change in home prices was the highest.
<img src="https://assets.site-static.com/userfiles/663/image/month-over-month-home-price-changes-oct-2022.jpg" width="880" height="641" alt="graph of top 50 markets for home price growth last month" title="Month-Over-Month Home Price Changes" class="img_box_center" />
Of the 893 cities reported by Zillow, 769 (86.1%) posted growth in home prices for the past month, while 124 markets (13.9%) reported declines. Perhaps this is why we're inundated with reports of declining home prices.
If you have seen some of my recent reports on US home prices, then you know that it is common for the median home price to stagger step higher throughout the year (or stagger step lower in a declining market). We really can't call price change trends after a few months because if we did, we would have reported declines in each of the past five years (years when the median home price soared). I've included a video below that shows home price changes with their staggered advances.<br /><br />US Home Sales By Month & Year
This next graph plots the number of monthly listings for the past four years. It's a different view of listings that sheds light on the volume reduction in inventory.
<img src="https://assets.site-static.com/userfiles/663/image/home-sales-by-month-year-oct-2022.jpg" width="880" height="641" alt="graph of US home sales by month and year" title="Number Home Sales By Month & Year" class="img_box_center" />
The black line in the graph above plots the number of listings that entered the market each month this year. Note that there are now (slightly) more listings than last year at this time, the number of homes for sale remains far lower than what was reported in the previous two years. It's important to remember that those years were inventory deficient as well.
Today, the number of listings is 30% to 60% lower than in recent years, and all four years shown were sellers' markets, where the number of listings was far too few for the demand in the market. Demand will have to go far lower to create the supply and demand dynamic that will cause home prices to fall for an extended period.<br /><br />New Listings Entering The Market
This graph plots the number of new listings entering the market each month for the past four years.
<img src="https://assets.site-static.com/userfiles/663/image/new-listings-us-october-2022.jpg" width="880" height="641" alt="Graph of new listings in the US for September 2022" title="New Listings Last Month" class="img_box_center" />
Even as many national news media report that home prices will crash and burn, we see the inventory drop. The only way we'll see major price declines is for supply to outrace demand, but this graph clearly shows that supply is dropping in line with demand.
As of today, it is safe to report that there is no sign of a growing-supply problem. Instead, the lack of supply will put further pressure on home prices. If you want to know more about new construction homes, I’ve included a video below that digs into builder production and the new construction pipeline.2022-10-17T03:00:00-07:002022-10-25T08:17:36-07:00Joe Manausatag:manausa.com,2012-09-20:30953Zillow Data Reveals Changing Housing Market Conditions<img src="https://assets.site-static.com/userfiles/663/image/zillow-housing-market-report-september-2022.jpg" width="880" height="587" alt="Report on the US housing market from Zillow" title="Zillow Housing Market Report September 2022" class="img_box_center" />Zillow has released a whole new month of housing market data, and we find an interesting turn in their forecast compared to just six months ago. Things are changing fast in the housing market, and Zillow's extensive statistics files allow one to zero in on the most interesting trends.
Long-time readers of our blog know that we obtain housing data from numerous sources around the internet to provide a broad, unbiased view of housing market conditions, so if you are new here and think that I'm giving credence to Zillow or its business model, you can be assured that it's "just their turn" in our reporting cycle.
It is difficult to find impartial, credible sources for analytical data on housing. I turn to Zillow every quarter to see the market from its point of view I will share one great benefit of using Zillow market data is that it is far more timely than most national reporting sites with similar market coverage.<br /><br />
US Home Sales Are Declining
This graph reports Zillow's estimated number of unique properties sold each month.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-sales-estimates-september-2022.jpg" width="880" height="641" alt="Zillow's count of all US home sales September 2022" title="Zillow Unit Home Sales Graph September 2022" class="img_box_center" />
The blue bars measure the number of homes sold, while the yellow bars report the year-over-year change in sales. When the yellow bars rise about the horizontal axis, unit sales have grown. When the yellow bars fall below the horizontal axis, unit sales have declined.
Sales through July show that for thirteen straight months, home sales have declined in the US. This is non-seasonal information, as each month's change compares to the same month in the year prior. For example, the number of homes sold in July 2022 was 25% fewer than the number of homes sold in July 2021.
The big question this graph raises is, "why are home sales declining?"<br /><br />
Mortgage Interest Rates Are Significantly Higher Than 2021
This graph plots the average 30-year fixed mortgage interest rate since 1971, and the most recent months might shed some light on the decline in home sales.
<img src="https://assets.site-static.com/userfiles/663/image/mortgage-interest-rates-history-graph-september-2022.jpg" width="880" height="641" alt="Average monthly mortgage interest rates September 2022" title="Recent Mortgage Interest Rates Graph September 2022" class="img_box_center" />
When I was preparing this graph on August 23rd, I checked the Mortgage News Daily website, and it reported that the current rate was 5.6%, while the one-year-ago rate was 3.03%. The drastic change in mortgage interest rates means that the cost of money for homebuyers has pushed up 85% in just one year!
Rising mortgage interest rates have cooled buyer demand, and remembering the housing collapse in 2006, you might be concerned that the supply of homes for sale is rising out of control.<br /><br />Inventory Of Homes For Sale Is Still Declining
In this graph, Zillow reports the number of unique listings active in each given month since the beginning of 2019.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-graph-number-homes-for-sale-september-2022.jpg" width="880" height="641" alt="Zillow's inventory of US homes for sale September 2022" title="Zillow Inventory Of Homes For Sale Graph September 2022" class="img_box_center" />
The blue field measures the number of listings, while the red line plots the year-over-year change in inventory. Look where the red line crosses the dashed-blue line in 2019, as that is when the market shifted from inventory growth to inventory reduction.
In 2019, the market was already slightly skewed to sellers, as inventory levels were below six months of supply. As time progressed, the supply level worsened, and bidding wars among buyers became the norm.
The 2019 inventories were roughly 600,000+ homes too few, yet homebuilder production did not step up to fill in the void. So rather than see rising inventories accompany rising mortgage interest rates, we've experienced the opposite effect.
The inventory decline is not so apparent to people who do not track market behavior regularly. With builders representing less than 10% of today's current inventory (compared to the 20+% in 2006), the existing homes inventory has greater control of the growth or decline of inventory levels.
Today, when a buyer opts out of the market due to affordability, it often is a buyer who would also have a home to sell. Thus a buyer leaving the market results in a seller leaving the market in roughly 50% of the cases. The move-up and move-down buyers have slowed, so inventory growth has slowed too.<br /><br />Median Home List Price Is Rising
This next graph plots the median prices at which homes across the US were listed and sold.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-price-september-2022.jpg" width="880" height="641" alt="Zillow's measure of the median home list price September 2022" title="Zillow Median Home Price Graph September 2022" class="img_box_center" />
The blue field in the graph shows the median list price, while the red line shows Zillow's estimate of the median home sales price during the same time period.
The blue field shows the seasonal pattern on the median list price, with prices starting low at the beginning of the year, moving higher during the summer, and then falling slightly towards the end of the year. The median sales price does not move similarly.
I believe this graph reveals two things. First, home prices generally rise, so it makes sense that end-of-year asking prices are higher than at the beginning of the year. Second, sellers who tried too high of an asking price earlier in the year end up dropping their prices to get sold before the end of the year. Remember, a homeowner can ask any price they like, but to get sold, they have to meet the market at the right price.
The red line shows that there is no actual inner-year cycle for prices, they just generally rise. The red line has been rising faster of late, but I think the declining number of sales will flatten it out to where prices are growing at more "normal" rates (the average home price growth over the past 80 years is 5.2%).<br /><br />
US Home Price Growth Has Cooled
This graph is Zillow's take on the median home price, measuring the typical home value for single-family homes, condominiums, and co-ops, including market changes across the United States. It reflects the typical value of homes in the 35th to 65th percentile. In other words, it approximates the median by swiping the middle-third of the market and analyzing it over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-september-2022.jpg" width="880" height="641" alt="Zillow's Graph Of The Median Home Price September 2022" title="Zillow Median Home Value Index September 2022" class="img_box_center" />
If you look closely at this graph, you'll see that Zillow has reported home values from 2000 through July of next year because their dataset includes past data plus a forecast that home values will rise 2.7% over the next twelve months. Just as a reference to how conservative Zillow's estimate has become, it estimated 17.3% annual growth back in January (six months prior).
Zillow’s Home Value Index provides a great perspective on the toxic decline in home affordability. When we compare the slope of price growth over the past two years to the slope of price growth during the housing bubble, it is an alarming image.
One must remember that the supply and demand dynamic for homes is the key driver of home prices. Today's sub-3 months of supply of homes has caused home prices to soar, and as we will see in our next graph, it is doing the same for rental rates.<br /><br />Double-Digit Growth For US Home Rental Rates
The final graph in today's Zillow Housing Report explains why there is no housing bubble and that conditions are even worse than the bubble of 2006. It measures what Zillow refers to as the "typical observed market rental rate" and, like the previous graph, takes a swipe from the middle of market rents to approximate the median rental rate over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-observed-rent-index-september-2022.jpg" width="880" height="641" alt="Zillow's measurement of the change in rental rates September 2022" title="Zillow Observed Rent Index Graph September 2022" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
The blue area measures the rental rate index each month (median rent), while the red line plots the year-over-year percentage change each month. It is this red line that is alarming.
As the inventory of homes for sale has declined, so has the inventory of homes for rent. People who must move today have no good choice between buying versus renting a home. The cost for each has exploded.
In July, the median rental rate of $2,031 was more than 13% higher than the median rental rate of $1,794 recorded in July 2021. Can you imagine if your monthly rent was increased from $1,800 to over $2,000 per month? If the rate remains the same over the next year, the median unit will rent for $2,300 per month, a rent hike of more than $500 monthly in just two years!
I often receive comments from viewers on our <a href="https://www.youtube.com/channel/UC91JHHJm-D8cFDeXR1RQIBA" title="Joe Manausa Real Estate On YouTube">YouTube Channel</a> saying they are waiting for home prices to fall. I certainly understand the feeling, but I have to wonder, where are they living while waiting? Are they waiting in a home they own (meaning if their assumption is correct, their home price will fall too), or are they waiting in a rental property where their lease renewal will hurt?<br /><br />The Takeaway From Zillow's Housing Update
The previous graph is the smoking gun that lets us know just how troubled the housing market has become. When people get priced out of the "for sale" market, they no longer can turn to the "for rent" market, as they will be priced out of that too!
Most people do not realize that when home prices crashed after the housing bubble, rents kept moving higher. That was a sign that we did not interpret correctly, as it was a signal that despite the large inventory of homes for sale, there were not enough homes built in America.
The plummeting demand that caused the inventory imbalance was caused by government involvement that took away loan options for nearly all but the wealthiest of borrowers. Loan qualification standards were pushed far higher than ever in the past by a government intent on slowing a perceived "out of control" housing market.
Since the bubble burst, we have seen a significant slowdown in the number of residential units built to house our growing population. Unfortunately, inflation has pushed the cost of new construction to a level where the median home buyer cannot be served.
The more that I read, and the more that I study housing data from various sources, the more I am convinced we are rapidly heading towards a renter nation. In an industry where there has never been centralized control of home prices and rental rates, we'll begin to see both dictated by Wall Street giants which will consume much of the inventory in the future.
If you feel like I'm overreacting or you have ideas for a different outcome, I welcome your comments below.2022-08-29T02:51:00-07:002023-01-22T14:44:04-07:00Joe Manausatag:manausa.com,2012-09-20:30010Zillow Real Estate Update July 2022<img src="https://assets.site-static.com/userfiles/663/image/zillow-real-estate-update-july-2022.jpg" width="880" height="587" alt="Report on the US housing market is done from Zillow data alone July 2022" title="Zillow Real Estate Update July 2022" class="img_box_center" />Zillow has published it's latest data on its real estate website, showing a unique perspective on the changes in the US housing market. While Zillow is not my sole source of information on the housing market, it is one that has a more active role than most that report on housing market behavior.
I am often asked why I produce reports based upon Zillow's data, often times with commentary on Zillow's bias. My response is always the same. It is tough finding reputable data sources on the US housing market, so I'll give just about any source a try. Remember, I have a pretty robust data set from multiple other sources, so I won't publish something that doesn't jibe with what other sources are reporting. The goal is to expand our understanding of the housing market.
This report on the US real estate market is primarily supported by data supplied by Zillow, and it provides enough information for us to draw a logical forecast of what to expect for the next year in housing.<br /><br />
The Demand For Houses Is Cooling
The first graph in today's Zillow real estate update shows Zillow's estimated number of unique properties sold each month, and currently, there is an eleven-month trend that is hard to ignore.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-unit-home-sales-count-july-2022.png" width="880" height="641" alt="Zillow's count of all US home sales July 2022" title="Zillow Unit Home Sales Graph July 2022" class="img_box_center" />
In the graph above, the blue bars measure the number of homes sold, while the yellow bars report the year-over-year change in sales. When the yellow bars rise above the horizontal axis, unit sales have grown. When the yellow bars fall below the horizontal axis, unit sales have declined.
Through May, there have been eleven straight months where US home sales have declined when compared to the same months in the year prior. This is non-seasonal information, as each month's change is a comparison of the same month in two consecutive years. For example, the number of homes sold in May 2022 was 16% lower than the number of homes sold in May 2021.
With nearly a solid year of declining US home sales, does this absolutely mean that demand is falling? Here's an answer that won't surprise you: YES, the market is cooling. Let's take a look at a handful of other key metrics and then return to the activity in the real estate market today.<br /><br />
Mortgage Interest Rates Have Exploded
This graph plots the average 30-year fixed mortgage interest rate since 2016, and it shows rates have hit a high point. What this graph does not show is that mortgage interest rates today are higher than in any previous month going back to the end of 2008!
<img src="https://assets.site-static.com/userfiles/663/image/zillow-mortgage-interest-rates-july-2022.png" width="880" height="641" alt="Average monthly mortgage interest rates July 2022" title="Recent Mortgage Interest Rates Graph July 2022" class="img_box_center" />
When I was preparing this graph on July 5th, I checked the Mortgage News Daily website and it was reporting that the current rate was 5.7% while the one-year-ago rate was 3.13%, meaning that the cost of money for homebuyers has pushed up 82% in just one year.
Just chew on that statistic for a moment. The year-over-year change in mortgage interest rates is nearly double! In fact, in mid-June, rates shot above 6% and were MORE THAN DOUBLE what they were a year ago.
When rates shoot significantly higher, it has an immediate impact on the real estate market that is akin to "sticker shock." People who have been shopping for a home and who had established a budget can no longer afford homes that had previously fallen within their available range. This pushes them to homes that are inferior to their previous qualifications, and it often slows decision-making until they come to grips with their reality.
There is no doubt that soaring mortgage interest rates have cooled buyer demand, yet I believe there is another factor that has also contributed to the eleven-month run of declining home sales.<br /><br />
Supply Of Homes Continues To Fall
While demand is falling, supply is also falling. In this graph, Zillow reveals the number of unique listings that were active at any time in a given month since the beginning of 2019, and despite a decline in home sales, the inventory of homes for sale continues to plunge.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-for-sale-inventory-july-2022.png" width="880" height="641" alt="Zillow's inventory of US homes for sale July 2022" title="Zillow Inventory Of Homes For Sale Graph July 2022" class="img_box_center" />
The blue field measures the number of unique listings, while the red line plots the year-over-year change in inventory. We can see that in 2019, the market shifted from inventory growth to inventory reduction. For the past two years, the inventory of homes for sale has receded by more than 20% each month when compared to the recorded inventory levels the year prior.
In 2020, right as the COVID pandemic was hitting most US markets, there were nearly 1.8 million homes on the market. Here we are just two years later and we have fewer than 1 million homes for sale.
Every once in a while, I'll get a reader comment on the fact that their local market conditions are showing a rapidly growing inventory of homes for sale. While this might be true in a very few areas, the facts are clear that overall, the US housing market is grossly undersupplied with homes.
While it is true that sticker shock and soaring mortgage interest rates have cooled buyer demand, I can tell you from the street level that it is also the low inventory of homes that has impacted sales in 2022. There just aren't enough available houses out there and buyers are getting frustrated with having to bid against multiple other buyers for anything they like.<br /><br />The Median Home Price Is Shocking
With inventories plummeting, you should not be shocked to hear that prices are soaring higher. This next graph plots the median price at which homes across the US were listed and sold, and the changes are not easy to stomach.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-home-price-july-2022.png" width="880" height="641" alt="Zillow's measure of the median home list price July 2022" title="Zillow Median List Price Graph July 2022" class="img_box_center" />
The blue field in the graph shows the median list price, while the red line shows Zillow's estimate of the median home sales price during the same time period. People who have not closely monitored the housing market would be shocked at what the blue field is showing:
The median asking price from home sellers has risen more than 53% in just four years! In 2018, the median asking price was $275K, and today it is more than $420K! So how has that impacted the median sales price? The median sales price has risen 52% during those same four years!
Even with demand falling, we should not expect to see any relief from the rising slope of the median sales price until we start fixing the inventory shortage that has plagued the housing market since 2019.<br /><br />Zillow's Forecast For US Home Prices
This graph is Zillow's take on the median home price. It reflects the typical value of homes in the 35th to 65th percentile range. In other words, it approximates the median by swiping the middle-third of the market and analyzing it over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-july-2022.png" width="880" height="641" alt="Zillow's Graph Of The Median Home Price July 2022" title="Zillow Median Home Price Graph July 2022" class="img_box_center" />
You might have noticed that the horizontal axis includes a date range that extends to a year from now. Zillow has estimated home values from now through May of next year with a forecast that home values will rise 9.7% over the next twelve months, a level three times the historical norm but lower than we've seen over the past few years.
Zillow’s Home Value Index is a clear image of how bad our housing market is behaving. Look at the slope of home value growth since 2020, it's toxically unhealthy. If you want some insight into what this price movement will do to the housing market, I urge you to watch some of my <a href="https://www.youtube.com/watch?v=SwXQiYkXH8M&list=PL3JrtRt_Vew1uCjHWXYZPqIoXsqXqMIpl&index=10" title="Home Affordability Forecast">videos on home affordability</a>.
If you happen to have followed our Zillow reports from the past, then you might have noticed that Zillow has reduced its one-year-out forecast by about five percent since March. I believe this is a nod to the fact that demand is fallen, and (in my opinion), it relies heavily on the fact that mortgage interest rates have risen and won't come back down.
I believe Zillow's forecast for home price growth makes a lot of sense, but I'll warn you that if rates come back down to levels at or below 5%, we'll see absolute chaos and prices soaring well above double-digit rates. Remember, inventories are still dropping, so pricing pressure remains. If we were to see lower mortgage interest rates again, the sky's the limit for real estate appreciation.<br /><br />What Buyers Find When They Choose To Rent
The final graph in today's Zillow Real Estate Update is a full-fledge punch in the gut to buyers who have been priced out of the market. Historically, when home affordability shot higher, a segment of would-be buyers chose to rent because they just couldn't make the numbers work for a home purchase. When home affordability improved, those tenants became buyers.
This graph measures what Zillow refers to as the "typical observed market rental rate" and like the previous graph, it takes a swipe from the middle of the market to approximate the median and it shows why we're not going to be able to fix this housing market in the same way the last one was fixed.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-observed-rent-index-july-2022.png" width="880" height="641" alt="Zillow's measurement of the change in rental rates July 2022" title="Zillow Observed Rent Index Graph July 2022" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
The blue area measures the rental rate index each month (median rent) while the red line plots the year-over-year percentage change each month. It is this red line that explains why this market is in such a mess. For the past ten months, rents have exploded at a double-digit growth rate.
While the inventory of homes for sale has declined, so too has the inventory of homes for rent. And for those readers who want to know how we can report that the rental inventory is dropping (without actually having a dataset of rental unit supply)?
We can deduce this because rental rates are soaring. In May, the median rental rate of $1,979 was nearly 16% higher than the median rental rate of $1,708 recorded in May of 2021. Can you imagine if your monthly rent was increased from $1,700 to $2,000 per month? If the rate remains the same over the next year, that same median unit will rent for nearly $2,300 per month, a rent hike of nearly $600 per month in just two years!
Zillow's Real Estate Update
The previous graph is the smoking gun that lets us know just how troubled the housing market has become. When people get priced out of the "for sale" market, they no longer can turn to the "for rent" market, as they will be priced out of that too!
We have not been creating enough residential units to house our growing population, and unfortunately, inflation has pushed the cost of new construction to a level where the median home buyer cannot be served.
I am having a hard time finding a solution to what could be a severe turn towards a renter nation, where control of prices and rental rates move from "Main Street to Wall Street." We are seeing more "out of town" large-scale investors consume single-family detached homes, which historically, were not included in their housing consumption menu.
Zillow's current data shows that inventory in the US is falling, and from what I'm reading, very few local markets around the country will be spared from soaring prices and soaring rents.
My advice to all but the wealthiest of Americans is this: If you are happy in your home, be glad and enjoy it. If you are unhappy, you are running out of town to move into a home that you will both enjoy and be able to afford. Secure a home before it is out of your reach for good.2022-07-18T02:51:00-07:002022-08-23T07:51:46-07:00Joe Manausatag:manausa.com,2012-09-20:28269Zillow Housing Update May 2022<img src="https://assets.site-static.com/userfiles/663/image/zillow-real-estate-update-may-2022.jpg" width="880" height="587" alt="Report on the US housing market is done from Zillow data alone May 2022" title="Zillow Housing Update May 2022" class="img_box_center" />Every quarter, I scour the Zillow website in search of data showing the changes in the US housing market. It is not my sole source of information, but Zillow does measure the housing market in a unique manner that provides great insight for those of us who really care about what is truly going on in housing.
One of the hardest things about reporting on the US housing market is finding reputable data sources that can give us what we need to properly evaluate current conditions, but I have become a believer in the data that Zillow shares on the backend of its website.
This report on the US housing market is primarily supported by data supplied by Zillow, and it provides enough information for us to draw a logical forecast of what to expect for the next year in housing.<br /><br />ZILLOW HOUSING UPDATE VIDEO
Demand For Homes Is Falling?
The first graph in today's Zillow real estate update shows Zillow's estimated number of unique properties sold each month.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-sales-count-may-2022.jpg" width="880" height="641" alt="Zillow's count of all US home sales May 2022" title="Zillow Unit Home Sales Graph May 2022" class="img_box_center" />
The blue bars measure the number of homes sold, while the yellow bars report the year-over-year change in sales. When the yellow bars rise above the horizontal axis, unit sales have grown. When the yellow bars fall below the horizontal axis, unit sales have declined.
March home sales reveal that for nine straight months, home sales have declined in the US when compared to the same months in the year prior. This is non-seasonal information, as each month's change is a comparison of the same month in two consecutive years. For example, the number of homes sold in March 2022 was 17% lower than the number of homes sold in March 2021.
With nine straight months of declining US home sales, does this absolutely mean that demand is falling? Historically, the answer would be a resounding "YES!" But I'm not so sure this is the full answer today. Let's take a look at a handful of other key metrics and then return to this important question.<br /><br />There's Been A Spike In Mortgage Interest Rates
This graph plots the average 30-year fixed mortgage interest rate since 2016, and the most recent months show a definitive move to higher ground.
<img src="https://assets.site-static.com/userfiles/663/image/recent-mortgage-interest-rates-may-2022.jpg" width="880" height="641" alt="Average monthly mortgage interest rates May 2022" title="Recent Mortgage Interest Rates Graph May 2022" class="img_box_center" />
When I was preparing this graph on April 28, I checked the Mortgage News Daily website and it was reporting that the current rate was 5.3% while the one-year-ago rate was 3.14%, meaning that the cost of money for homebuyers has pushed up 69% in just one year.
Just chew on that statistic for a moment. The year-over-year change in mortgage interest rates is nearly 70% higher! A move like that has an immediate impact in the market that I liken to "sticker shock." The home that people thought they could afford a few months ago is now more expensive and requires a higher mortgage payment even if they finance the same amount of money. This results in them having to consider smaller homes for the payment amount they had planned on the larger home.
Skyrocketing mortgage interest rates have cooled buyer demand, yet I believe there is another factor that has greatly contributed to the number of homes sold each month declining for the past nine months.<br /><br />The Supply Of Homes For Sale Continues To Fall
In this graph, Zillow is showing the unique listings that were active at any time in a given month since the beginning of 2019, and despite a decline in home sales, the inventory of homes for sale continues to shrink.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-homes-for-sale-may-2022.jpg" width="880" height="641" alt="Zillow's inventory of US homes for sale May 2022" title="Zillow Inventory Of Homes For Sale Graph May 2022" class="img_box_center" />
The blue field measures the number of listings, while the red line plots the year-over-year change in inventory. Look to where the red line crosses the dashed-blue line in 2019, as that is when the market shifted from inventory growth to inventory reduction.
In 2019, the market was already slightly skewed to sellers, as inventory levels were below six months of supply. As time moved forward, the low level of supply got continually worse and bidding wars among buyers became the norm.
The peak of the market inventories were 600,000+ homes too few, and homebuilder production has not yet stepped up to fill in the void, though there are signs that this might finally reverse in 2022 for a handful of markets (BUT NOT THE US HOUSING MARKET OVERALL).
I believe the historically low number of homes for sale has been a significant piece of the declining sales dilemma, as buyers have been trying to obtain loans before low mortgage interest rates go away forever. When you combine rising rates and declining inventories, it is no wonder that the number of home sales is falling.<br /><br />The Median Home Price Is Soaring
This next graph plots the median price at which homes across the US were listed and sold.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-median-list-price-may-2022.jpg" width="880" height="641" alt="Zillow's measure of the median home list price May 2022" title="Zillow Median List Price Graph May 2022" class="img_box_center" />
The blue field in the graph shows the median list price, while the red line shows Zillow's estimate of the median home sales price during the same time period.
The blue field shows there is a seasonal pattern on the median list price, with prices starting low at the beginning of the year, moving higher during the summer, and then falling slightly towards the end of the year. The median sales price does not move in a similar manner.
I believe this is showing us two things. First, home prices generally rise, so it makes sense that end-of-year asking prices are higher than the beginning of the year asking prices. Second, it shows that sellers who tried too high of an asking price earlier in the year, end up dropping their prices to get sold before the end of the year. Remember, a homeowner can ask any price that they like, but to get sold, they have to meet the market at the right price.
The red line shows that there is no actual inner-year cycle for prices, they just generally rise. The red line has been rising faster of late, and this is primarily linked to the gross discrepancy between supply and demand.
Even with demand falling, we should not expect to see any relief from the rising slope of the median sales price until we start fixing the inventory shortage that has plagued the housing market since 2019.<br /><br />Zillow's Forecast For US Home Prices
This graph is Zillow's take on the median home price. Zillow explains the results as a smoothed, seasonally adjusted measure of the typical home value for single-family homes, condominiums, and co-ops including market changes across the United States. It reflects the typical value of homes in the 35th to 65th percentile range. In other words, it approximates the median by swiping the middle-third of the market and analyzing it over time.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-home-value-index-may-2022.jpg" width="880" height="641" alt="Zillow's Graph Of The Median Home Price May 2022" title="Zillow Median Home Price Graph May 2022" class="img_box_center" />
You might have noticed that the horizontal axis includes a date range that extends to a year from now. Zillow has estimated home values from 2000 through March of next year with a forecast that home values will rise 14.9% over the next twelve months
Zillow’s Home Value Index is a clear image of how bad our housing market is behaving. Look at the slope of home value growth since 2020, it's toxically unhealthy. If you want some insight into what this price movement will do to the housing market, I urge you to watch some of my <a href="https://www.youtube.com/watch?v=SwXQiYkXH8M&list=PL3JrtRt_Vew1uCjHWXYZPqIoXsqXqMIpl&index=10" title="Home Affordability Forecast">videos on home affordability</a>. I am forecasting a move to a renter nation as home affordability plummets.<br /><br />US Rents Are Soaring Too
The final graph in today's Zillow Housing Update serves as a test to ensure that I am not overreacting to moves in the for-sale market. You see, the for-sale market and the for-rent market do not operate in separate vacuums.
Historically, when home affordability surged, a segment of would-be sellers became landlords as declining demand made it harder to get homes sold. When home affordability improved, those landlords flipped their homes over to the for-sale market to finally get them sold.
We would see inventory shift from one side of the market to the other, so when one was oversupplied, it meant that the other would take up excess inventory. But as you'll see in this final graph, an inventory shift cannot happen today.
This graph measures what Zillow refers to as the "typical observed market rental rate" and like the previous graph, it takes a swipe from the middle of the market to approximate the median and it shows why we're not going to be able to fix this housing market in the same way the last one was fixed.
<img src="https://assets.site-static.com/userfiles/663/image/zillow-observed-rent-index-may-2022.jpg" width="880" height="641" alt="Zillow's measurement of the change in rental rates May 2022" title="Zillow Observed Rent Index Graph May 2022" class="img_box_center" style="font-size: 16px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-weight: 400;" />
The blue area measures the rental rate index each month (median rent) while the red line plots the year-over-year percentage change each month. It is this red line that should make your head spin.
As the inventory of homes for sale has declined, so too has the inventory of homes for rent. How do we know rental inventory is dropping (without actually having a dataset of rental unit supply)?
We can deduce this because rental rates are soaring. In March, the median rental rate of $1,904 was nearly 17% higher than the median rental rate of $1,630 recorded in January of 2021. Can you imagine if your monthly rent was increased from $1,630 to $1,904 per month? If the rate remains the same over the next year, that same median unit will rent for $2,224 per month, a rent hike of nearly $600 monthly in just two years!
Lessons From This Quarterly Zillow Housing Update
The previous graph is the smoking gun that lets us know just how troubled the housing market has become. When people get priced out of the "for sale" market, they no longer can turn to the "for rent" market, as they will be priced out of that too!
We have not been creating enough residential units to house our growing population, and unfortunately, inflation has pushed the cost of new construction to a level where the median home buyer cannot be served.
I am having a hard time finding a solution to what could be a severe turn towards a renter nation, where control of prices and rental rates move from "Main Street to Wall Street." We are seeing more "out of town" large-scale investors consume single-family detached homes, which historically, were not included in their housing consumption menu.
Zillow's current data shows that inventory in the US is falling, and from what I'm reading, very few local markets around the country will be spared from soaring prices and soaring rents.
My advice to all but the wealthiest of Americans is this: If you are happy in your home, be glad and enjoy it. If you are unhappy, you are running out of town to move into a home that you will both enjoy and be able to afford. Secure a home before it is out of your reach for good.2022-05-02T02:51:00-07:002022-06-27T12:30:23-07:00Joe Manausatag:manausa.com,2012-09-20:53205 Things A Seller Can Do To NOT Lose Money Using Z-estimatesI don't know if you heard that Zillow is being sued over the inaccuracy of its Zestimate application.
The fact is we've noticed <a href="https://www.manausa.com/how-to-sell-your-house/" title="real estate agent job description">local home sellers</a> put in a position to lose money so we've assembled these tips to keep you safe.
<img class=" img_box_center" title="Lawsuit On Flawed Zestimate Tool" src="https://www.manausa.com/uploads/agent-1/zillow-lawsuit-zestimates.png" alt="Lawsuit Sheds Lights On Flawed Zestimate Tool" width="880" height="587" />
Lawsuit Sheds Lights On Flawed Zestimate Tool
This is big news in the real estate sector and it could have a significant impact in what online real estate data services can do with their information.
But while "big," it is not "new" news to our readers. If you recall, we shared the <a href="https://www.manausa.com/blog/tag/zillow/" target="_blank">article</a> "<a href="https://www.manausa.com/blog/zillow-zestimate-valuation/" target="_blank">Zillow Zestimate Missed By A Mile On This One</a>," (a full year ago) regarding a case that is almost too amazing to believe.
The fact is that the Zillow Zestimate, as well as all other online home valuation tools that I have seen and used, are not yet to the point where their results fall within an acceptable margin of error.
The fact that some people around the country relied upon the valuations provided by the Z-estimate tool and ended up selling their homes far below what they could have received seems (to me) to be a stretch of our legal system. After all, it is a free service and shouldn't people know better than to trust the sale of their home to an "app" when better information is available"
Home Valuation Tools Lack Key Value Data
I will concede that most online home valuation tools (including the "Zestimate") are as accurate as most real estate agents. Bear in mind that the majority of listing agents in America sell fewer than 2 homes per year and are not trained (nor inclined) to truly monitor home values across a local real estate market.
But for the purpose of this article, I'll compare these tools with the top 1% of the real estate agents in the market, the people that you should be interviewing for the job of selling your home when the time is right. These people have the tools, knowledge, experience, and RECENCY of ACTIVITY in the market to truly understand home valuation. It is a combination of factors that make it very hard at this present time to replicate using data from across the internet.
The fact is the data these tools need is nowhere to be found, and it will take years of assembling this data to truly make a home valuation application competitive with the <a href="https://www.manausa.com/barbara-corcoran-endorsements/" target="_blank">top real estate agents</a> in the market.
5 Things A Seller Can Do To NOT Lose Money Using Z-estimates
The following tips will help you understand how to use the Zillow Zestimate (or any other online valuation tool for that matter) in your preparation to sell your home, without you leaving money on the table.
1. DO use an online valuation tool to check the work of your real estate agent - One statistic that seems to recur every single year, regardless of the technical innovations sweeping through the real estate industry, is the fact that roughly 70% of all home sellers hire the first agent with whom they speak about the job of selling their home. Seriously? You'll be spending tens of thousands of dollars for this service (ie, do you purchase the first car you see that is priced within the range you want to spend?), don't you think you should ensure you get the best you can so you net more money for your home? Do you want to just get your home sold? Or do you want to net top dollar from the sale? Regardless of the agent you hire, you should check his or her work by looking at comparable sales provided by the online home valuation tools. If you think your agent is recommending a price too low (or too high), question her about the specific comparable sales that the tool(s) have provided.
2. DO NOT use a home valuation tool as the basis of your decision to sell your home - Too often, homeowners decide to sell their home based upon "what they will do with the money from the sale." They take only enough time to determine the benefit from the sale, and not enough time to consider what will happen should they not receive the amount of money they perceived was available. These home valuation tools provide some good information, but their conclusions should not be used to make big decisions. Get the best real estate listing agent in your area to help you decide if the real equity in your home is adequate to support your sale and move.
3. DO NOT use a real estate agent's valuation of your home as the basis of your decision to hire that agent - In point #1 above, it is noted that the biggest mistake made by home sellers is they hire they first agent they interview. The primary reason that they do this is that they like the agent and they love the amount of money that agent tells them their house is worth. IMPORTANT ... DO NOT LET AN AGENT "CLOSE YOU" BY SAYING YOUR HOUSE IS WORTH A HIGH DOLLAR AMOUNT! This happens all the time. You meet with a charming agent, they say your home should fetch 120% of its real current value. You are so excited by your new-found wealth that you hire the agent. Then you become a statistic, another home seller who fails to capture the top dollar and perhaps fails to sell your home at all (read <a href="https://www.manausa.com/blog/sell-house-fast-2015/" target="_blank">this article</a> to see why you will typically net more money with a fast sale than with a sale that takes months to complete).
4. DO use a Zestimate as a way to gauge the general direction of the market - The Zestimate still does not accurately determine a singular home's value in many cases because it has not been loaded with the data that helps distinguish the fine particulars of one home versus another. Believe it or not, land size, frontage (like being on a lake or a golf course), and even whether or not a home has a swimming pool does not appear to be considered in the valuation of a home by most of these tools. Do you think your home with frontage on the lake is worth more than the home across the street that backs up to Thomasville Road? Well, you might have a difference of opinion then with your online appraisal. But that does not mean the Zestimate does not have value at the macro level. It is tracking useful value trends that can give you an idea of the market for your home now versus a time in the past. If your zestimate is higher today than it was a year ago, then likely your home is worth more than you would have achieved in a sale last year. Just don't rely on the specific value, rather pay closer attention to the trend.
5. DO NOT use the comparable sales information from nearby recent home sales as "fact" - This is a big deal. Most people think that sales information on the internet must always be true ... but guess what? It's not always true and accurate. I have seen recorded sales where I knew the back-story of the transaction and the public filing in no way represented what truly occurred. For example, let's say you notice that your neighbor sold their house last month for $300,000. Do you think it matters if the home seller paid $18,000 of the buyer's closing costs (meaning a real net sales price of only $282,000?). What if the seller of that same transaction allowed the buyer to keep furniture, fixtures, and the riding lawn mower. Do you really consider it a $300,000 comparable sale if everybody else is not paying closing costs and all are taking their belongings with them? These are the little intricacies that are not relayed in public filings, thus you should not consider a singular comparable sale as fact until an expert has verified the validity of the price. Of course, the opposite scenarios exist too. If a set of parents sell a home to their child at a price below the market, is that truly a comparable sale? Most online valuation tools don't look to see the parties in a past sale, they just record price and value.
Regardless of the tool you use, recognize that they have a long way to go before they will be able to accurately value all homes within a market.
I hope this article has shed some light on both the dangers of online home valuation tools, as well as the benefits of using them to support you when it comes time to sell your home.
If you would like to see what a world-class listing agent can do to help you attain top dollar when selling your home, simply <a href="https://www.manausa.com/blog/drop-joe-a-note/">drop me a note</a> and we'll be in touch right away to show you a better way to market your home for sale.<br /><br />Related Links
<a href="https://www.manausa.com/blog/zillow-zestimate-valuation/" target="_blank">Zillow Zestimate Missed By A Mile On This One</a>
<a href="https://www.manausa.com/blog/real-estate-appraisal-market-value/" target="_blank">How I Learned True Market Value From A Diamond Dealer In New York</a>
<a href="https://www.manausa.com/blog/zillow-make-me-move/" target="_blank">Come On Zillow, Make Me Move!</a>
2017-05-17T06:00:00-07:002018-10-04T10:48:30-07:00Joe Manausatag:manausa.com,2012-09-20:5104Zillow: Half Of All Buyers Now Using Modern Home Buying ProcessThe mega real estate advertiser Zillow released a report announcing new data about how home buyers search and what they look for in an agent.One specific point that I found interesting claimed that one half of all buyers are now doing something that I believe is very smart.Smart Tip For Homebuyers I have been advocating (SCREAMING) for buyers to use a more modern homebuying process for years, and now apparently it is starting to happen. Gone are the days of ignorant buyers letting the listing agent or (Gasp) the agent "on the floor" guide them on buying a home. Seriously, times have changed. Perhaps the most critical element of a modern homebuying process is the first step ... interviewing agents for the job of being your buyer's agent. Not unlike home sellers who first interview agents before hiring one to sell their home, buyers too can gain great benefits by working with a top agent that is focused on saving them money while ensuring complete satisfaction in the home that they purchase. The following graphic was taken from the recent Zillow report, and it identifies the time period in which buyers select an agent. It evens segments the buyer population by generation group (Millennials, Gen X, and Baby Boomers). <img class=" img_box_center" title="Zillow HomeBuyer Survey" src="https://www.manausa.com/uploads/agent-1/zillow-survey-buyers.png" alt="Zillow survey of homebuyers yields interesting change in behavior" width="880" height="587" /> This shows that one half of all buyers are choosing their buyer's agent before they even begin the process of buying a home. Wonderful! Now to reach the second half, as they are not going to be completely satisfied. You might recall we shared a <a href="https://www.manausa.com/blog/mistakes-of-homebuyers/" target="_blank">survey of recent homebuyers</a> (prepared on behalf of Chase Bank) a while back that showed that 80% of buyers surveyed wish they had done things differently. Take a look at this short animated video which shows the reasons why most buyers end up unsatisfied and wishing they had utilized a better home buying process. Brief Real Estate Buyers Video We have created a simple e-series that is designed to walk you through a better way of buying a home. It is filled with all the information and processes necessary for you to 1) save money on your next home purchase, and 2) become part of the 20% of homebuyers who are completely satisfied with their home purchase. Home Buying For Smart People <br /><br />Related Links<a href="https://www.manausa.com/blog/perfect-home-buying-offer/" target="_blank">Discover The Secret To Making A "Perfect" Home Buying Offer</a><a href="https://www.manausa.com/blog/home-buying-team/" target="_blank">The 7 Most Important Members Of Your Home Buying Team</a><a href="https://www.manausa.com/blog/how-to-buy-a-home-negotiate/" target="_blank">How To Buy A Home When The Seller Will Not Negotiate</a>2016-07-19T05:54:00-07:002017-07-01T03:51:55-07:00Joe Manausatag:manausa.com,2012-09-20:4879How I Learned The Difference Between A Real Estate Appraisal And True Market Value From A Diamond Dealer In New York<img src="https://populardownloads.s3.amazonaws.com/Pictures/Real-Estate-Appraisal-methodology.gif" width="880" height="587" alt="Are you wondering why there is a difference between a real estate appraisal and the true market value of a property? If so, you are not alone." title="Real Estate Appraisal Technique" class="img_box_center" />Are you wondering why there is a difference between a real estate appraisal and <a href="https://www.manausa.com/blog/click-to-get-your-homes-value/" target="_blank">the true market value of a property?</a> If so, you are not alone.
If there is one practice that confounds both homebuyers and home sellers alike it's the fact that the majority of real estate transactions close at the mercy of an appraisal conducted for a purpose that most consumers do not consider.
Understanding these differences will save you money when it comes to buying or selling a home, and it will help you appreciate the need and value of a real estate appraisal (even though it might not be necessarily telling you what the home is worth in today's real estate market).<br /><br />Related Links
<a href="https://www.manausa.com/blog/click-to-get-your-homes-value/" target="_blank">Can You Just Click The Button To Get Your Home's Value?</a>
<a href="https://www.manausa.com/blog/zillow-real-estate-value/" target="_blank">Zillow Real Estate Value - Fact Or Fiction?</a>
<a href="https://www.manausa.com/blog/progressive-marketing-plan-for-your-home/" target="_blank">Home Seller's Video</a>
<br /><br />Full Video Explantation
What Is A Real Estate Appraisal?
An appraisal conducted by a professional, licensed real estate appraiser is an opinion of value based upon certain conditions and a specified purpose.
The purpose of the real estate appraisal is seldom to provide the home seller with its current value in today's housing market, so it is important for the reader to consider the purpose of the appraisal if relying on its valuation as part of a decision-making process.
When Appraisals Cause Confusion
The biggest confusion that I see surrounding real estate appraisals occurs after a homeowner orders an appraisal on his home.
This process of determining the home's value is very different than the process a buyer's bank will use once a contract has been attained, from the selection of the specific appraiser down to the rules and obligations the appraiser will follow, the process and the appraiser's liability are simply not the same. Thus, most appraisals that I have seen performed for and requested by the owner of the property are valued higher than those performed for the purchase of the home by a buyer.
For years I felt like this was a bunch of hooey, that the industry was corrupt in saying that a home's value was different depending upon the reason for the valuation.
But then I got engaged.
<img src="https://www.manausa.com/uploads/agent-1/Real-Estate-Appraisal.gif" alt="Real Estate Appraisal Versus Market Value" width="380" height="493" class="img_box_right" />In the mid 1990s, my (then) fiance Michelle and I made a trip to New York in order to visit the city and purchase an engagement ring in the Diamond District. I figured the amount of money we could save by going there and buying direct would more-than offset the cost of the trip.
Before the trip, I was schooled by my grandfather (who had become active in the diamond business during the later-years of his life). I prepared myself for evaluating cut, clarity, color and carat weight, and I departed Tallahassee feeling comfortable with what I should be able to acquire within my budget.
One full day of shopping on 47th Street in New York City was all I needed. Michelle and I chose a stone and the merchant urged us to "go upstairs" and have it "appraised" for insurance purposes. So up I went to an appraisal office, and this is what the appraiser reported to me after viewing the diamond (numbers changed to protect the innocent).
<img src="https://www.manausa.com/uploads/agent-1/real-estate-quotes.png" alt="Joe Manausa real estate quotes" width="60" height="50" /> You have purchased a beautiful stone. I would say it has a value of $10,000, but I would ensure it for $18,000.
Huh? It's worth $10,000, but he gave me an appraisal saying it was worth $18,000. This certainly smelled fishy.
I asked him to explain to me how he could give me an appraisal with a value higher than what I had just paid 30 minutes prior (I know I'm a shrewd negotiator, but ...).
His explanation made good sense to me, and it also gave me a new perspective for the differing purposes of real estate appraisals.
He explained that the diamond could be purchased (or a very similar one could be purchased) for $10,000 right now on 47th Street in NYC, but I should ensure it for an amount that would allow me to replace it (should it be lost or stolen) without me having to come back to New York.
In essence, he was giving consideration to replacement cost and convenience in his appraisal, he was not telling me that I could go out and sell it for $18,000.
Similar considerations are made during real estate appraisals, and they are done so based upon data that is often 9 months old (or even older).<br /><br />Other Home Valuation Considerations
There are now <a href="https://www.manausa.com/blog/zillow-real-estate-value/" target="_blank">automated tools on the internet</a> that provide valuations for homes, and unlike most real estate agents, I encourage you to look at these when you are surfing and home shopping online.
They offer a decent comparison shopping insight that most consumers need when they are getting started. Of course, I would not encourage you to make an offer to buy or sell based upon an <a href="http://www.tallahasseepropertyvalues.com/" target="_blank">online home valuation tool</a>, as these are not going to be accurate enough to get it "just right."
Today's Market Value Of A Home
The real estate appraisal that you are seeking when selling a home or buying a home can only be performed by a real estate agent who is actively working in the housing market and who has been hired by you to help them for that purpose.
Remember, 90% of real estate agents are part-time and/or rarely active, so you really need to take the time to interview agents for the job of helping you with your real estate transaction. Ask them to demonstrate their market prowess before you hire them to help you, as this is the one skill that all others work off of when it comes to putting money in your pocket.
It's not enough to ask them to show you the value of a home or area, you need to be able to check them out online and see that they are really active in the current market. There are many cheap "market analysis" tools that real estate agents can use to look as if they are competent, but see what others are saying about them to ensure that they are the right fit for you.
Of course, you can check out any one of the thousands of housing reports on the Tallahassee Real Estate website any time you like, <a href="https://www.manausa.com/blog/tag/housing-report/" target="_blank">here's a few hundred to get you started</a> :).
If you would like to know the value of a specific property, simply <a href="https://www.manausa.com/blog/drop-joe-a-note/">drop me a note</a> and we'll schedule a time to get that to you pronto!2015-09-02T02:16:00-07:002020-10-01T11:57:07-07:00Joe Manausatag:manausa.com,2012-09-20:4784Come On Zillow, Make Me MoveHave you ever seen the "Make Me Move" section on Zillow. It's funny and sad at the same time.
Zillow tells us that "<a href="http://www.zillow.com/wikipages/What-is-Make-Me-Move/" target="_blank">Make Me Move</a> is a free and easy way to tell others the price you'd be willing to sell your home for, without actually putting it on the market. It's that magical number you just can't refuse." Furthermore, whether you want to <a href="https://www.manausa.com/how-to-sell-your-house/" title="follow this link">sell your home</a> or not, everybody has their price, and this Zillow tool is where you tell everybody yours!
Today's article is inspired by a very simple question about Zillow's MMM (Make Me Move), but it really is a story about the predictable aspects of human nature.
And if you want to <a href="https://www.manausa.com/blog/your-asking-price-impacts-sale-of-your-home/" target="_blank">get top dollar for your home</a> when it comes time to sell, then you (and especially your real estate marketing team) had better have an excellent grasp of human nature and what it takes to attract multiple qualified buyers to your home.
The Make Me Move Seller
<img src="https://www.manausa.com/uploads/agent-1/Zillow Make Me Move.png" alt="Zillow Make Me Move" width="380" height="342" class="img_box_right" />
The Zillow Make Me Move home seller is the same every where you go, no matter which real estate market you find yourself browsing through. How do I know this?
Because it's human nature.
When we don't know what we want, we hedge our bets. We figure that until we know what we're doing, we'll throw out some "pie in the sky" figure that we know is way more than our home is worth.
And guess what.
Buyers do not want to over-pay!
Amazing huh? Homebuyers who are getting ready to spend hundreds of thousands of dollars are actually going to be informed before they make a buying decision ...
But homebuyers are not unique.
<img src="https://www.manausa.com/uploads/agent-1/Make Me Move Review.png" alt="Make Me Move Review" width="380" height="342" class="img_box_left" />When we go shopping for expensive consumer goods, it's not like we walk into the first store and just pay for the first thing that we see.
There is a process that we follow when we spend more than a small amount of money. The process is not necessarily the same for every buyer, but we all must make ourselves comfortable with what we're about to do before we spend a good bit of money.
Again, it's human nature. We work hard for our money, and we don't want to just throw it away.
When looking at <a href="https://www.manausa.com/luxury-homes/" title="Luxury Homes For Sale In Tallahassee">luxury homes for sale</a>, buyers are often online for more than a year before they make their decision. Do you think people who are spending a millions dollars and up are stupid? So why do we see homes over priced on MMM by 25%?
So throwing a high price on something is not likely to procure a sale from that "one fool" who has a lot of money and no plan on how he's going to spend it.
The Hidden Agenda Behind Zillow Make Me Move
<img src="https://www.manausa.com/uploads/agent-1/What Is Zillow Make Me Move.png" alt="What Is Zillow Make Me Move" width="380" height="342" class="img_box_right" />
Zillow makes its money on real estate agents, and by creating an environment to attract new home sellers, it gives real estate agents a great place to hunt for home sellers.
It's like the used car lot with crazy low price tags on some cars, it attracts car buyers like moths to a light. The purpose is not to sell the car, but to attract car buyers to whom other cars can be sold.
Rather than generate interest from buyers, it is far more likely that you'll generate a lot of calls from real estate agents wishing to list your home for sale.<br /><br />Related Links
<a href="https://www.manausa.com/blog/what-to-talk-about-with-listing-agent/" target="_blank">What Do You Talk To Your Listing Agent About After 3 Long Years?</a>
<a href="https://www.manausa.com/blog/re-list-real-estate-company/" target="_blank">Why You Should Never Re-List With The Same Real Estate Company</a>
<a href="https://www.manausa.com/blog/real-estate-listing-agent-believes/" target="_blank">I Want A Listing Agent Who Believes In My Property</a>
<a href="https://www.manausa.com/luxury-homes/" title="upscale houses for sale in Tallahassee">Upscale Homes For Sale In Tallahassee</a>
<br /><br />The Verdict On Make Me Move By Zillow
If you want to try to <a href="https://www.manausa.com/how-to-sell-your-house/" title="how to sell your house fast">sell your home</a> on your own, you might want to consider Zillow's Make Me Move. The key is to price your home attractively enough so that ready-buyers notice.
There are many things you must do to both sell your home on your own and<a href="https://help.manausa.com/fsbo/" target="_blank"> to make it financially rewarding (meaning you can sell on your own, but if you do so at a discount, what's the benefit, right?).</a>
<a href="https://help.manausa.com/fsbo/"><img src="https://assets.site-static.com/userfiles/663/image/FSBO_3D_Book2019FL.png" alt="Home Seller Handbook for FSBO" width="200" height="327" class="img_box_left" title="FSBO Book" /></a>Do not promote your home on Make Me Move without following a smart plan, because timing is also a key component to your achieving top dollar when selling your home.
As in all aspects of the marketing plan, it's about creating value in the eyes of prospective buyers.
To get the most money when you sell your home, you have to attract multiple buyers (contrary to the concept of "it only takes one buyer") if you want your home to be bid up to its highest market value.
For homeowners who have the time and resources to sell on your own, we have prepared a "<a href="https://www.manausa.com/blog/fsbo/">For Sale By Owner Handbook</a>" that is available for FREE, no strings attached. I promise if you follow its guidance, you can sell your home on your own, and get top dollar as well!2015-05-04T05:31:00-07:002019-02-13T05:04:19-07:00Joe Manausatag:manausa.com,2012-09-20:4118Zillow Real Estate Value - Fact Or Fiction?Have you recently used the Zillow Real Estate Value Tool and find yourself curious about its accuracy?
In my recent article about <a title="What Is My Home Worth Now versus Zillow Real Estate Value" href="https://www.manausa.com/blog/what-is-my-home-worth-now/" target="_blank">home valuations</a>, I discussed some of the benefits and pitfalls of using an online home valuation tool. But apparently my "dusting" of the subject caused a few people to want to know more.
Specifically, they asked about whether the Zillow real estate value of their home was more or less than its <a title="How To Value A Home without Using Zillow Real Estate Value" href="https://www.manausa.com/blog/how-to-value-a-home/" target="_blank">current market value</a>.
The Accuracy Of Your Zillow Real Estate Value
<a title="Zillow Real Estate Value" href="https://www.manausa.com/uploads/imagefiles/Zillow-Real-Estate-Value.png"><img class=" img_box_right" title="Zillow Real Estate Value" src="https://www.manausa.com/uploads/imagefiles/Zillow-Real-Estate-Value.png" alt="Zillow Real Estate Value" width="280" height="280" /></a>First of all, I am somebody who really appreciates <a title="How to sell a home using an internet marketing plan" href="https://www.manausa.com/blog/home-sellers/" target="_blank">the technology gains that have arrived for the real estate industry</a>.
The ability to analyze the <a title="The Tallahassee real estate market" href="https://www.manausa.com/idx/search-form/" target="_blank">Tallahassee real estate market</a> is so much easier today than it was 22 years ago when I first became a <a title="Joe Manausa Real Estate Tallahassee Florida" href="https://www.manausa.com/agents/276/joe-manausa/" target="_blank">real estate agent in Tallahassee</a>.
There is a (rather large) school of thought among my peers that says machines will never replace real estate agents when <a title="Don't give away your home!" href="https://www.manausa.com/blog/sell-a-home-without-giving-it-away/" target="_blank">determining the fair market value of a home</a>, but I am not of that mindset.
The value of a home is simply related to what a buyer would have to spend in order to get something very similar to the subject home. There are variables that must be considered, and the current state of supply and demand influences valuation (lots of buyers trying to buy few homes drive prices up, while few buyers and lots of homes on the market creates pricing pressure).
Ultimately, the majority of homes will eventually be accurately valued with an online tool, as all these variables are learned, stored, and programmed. Right now it appears as if the Zillow Real Estate Value Tool is leading the way towards this solution.
Local Zillow Real Estate Value
Unfortunately, the Zillow real estate value is not yet accurate. They utilize far too few of the critical variables to <a title="The value of your home ... it is what it is" href="https://www.manausa.com/blog/it-is-what-it-is/" target="_blank">determine the true market value of your home</a>, so be sure to consult a top real estate professional before deciding upon your housing course of action.
I would not expect the Zillow Real Estate Value Tool to be accurate enough to rely on for at least 3 to 5 more years, as they have data collection issues which they have yet to solve.
Don't be afraid to check your home's value on the Zillow website, but if you want more than just a ballpark figure, you currently need to get an analysis from a human being.
I would like to be that human being for you <img src="/res/tiny_mce/plugins/emotions/img/smiley-smile.gif" alt="Smile" title="Smile" border="0" />, just <a title="Contact Joe Manausa about Zillow Real Estate Value versus his value of your home" href="https://www.manausa.com/blog/drop-joe-a-note/" target="_blank">drop me a note</a> and we can schedule a time for a more thorough analysis than a simple Zillow real estate value of your home.
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit <a href="https://www.manausa.com/">www.manausa.com</a> or call us at (850) 366-8917.2013-05-16T09:12:00-07:002018-04-16T13:54:09-07:00Joe Manausatag:manausa.com,2012-09-20:3977'My Home Hasn't Lost Value Like Everybody Else's!'I came across a survey of homeowners that I think is very enlightening for many reasons. This Zillow real estate survey (a real estate aggregator and internet portal) asks homeowners what they think of their home value and what its value will be in the future. They also ask what the homeowner thinks about their home in relation to others in the market.
Perhaps the greatest thing about the Zillow real estate survey is that we can look at past and current surveys to see the trend of homeowner "consumer confidence" as it is measured using the home as the standard. Not surprisingly, homeowners are much more aware of the depreciation that has occurred in the past two years than they were just last year. But what do they think of their home value versus that of their neighbors?
But My Home Has New Carpet
The following real estate graphic is from the Zillow real estate survey and it shows the difference between homeowner perception and reality of the value of their homes. According to Zillow, 74% of the homes in the South decreased in value, yet only 49% of the homeowners thought their home lost value. While this might seem like a large void, last August Zillow measured 69% of the homes losing value and yet only 28% of the homeowners thought their home lost value. This means that more homeowners must be understanding the current market conditions.
<a href="https://www.manausa.com/uploads/imagefiles/Homeowner-Perception-Of-Home-Value.JPG"><img class=" img_box_center" title="Homeowner Perception Of Home Value" src="https://www.manausa.com/uploads/imagefiles/Homeowner-Perception-Of-Home-Value.JPG" alt="Homeowner Perception Of Home Value" width="600" height="481" /></a>
But We Put A New Roof On The Home Three Years Ago
This next graphic from the Zillow Homeowner Confidence Survey shows something that we see all the time. Generally speaking, most homeowners think their home is "special enough" that it will do better than the market. When asked about the outlook for their own home over the next 6 months (versus the outlook for the local housing market), homeowners expected their own home to do better.
<a href="https://www.manausa.com/uploads/imagefiles/My-Home-Value-Is-Doing-Fine.JPG"><img class=" img_box_center" title="My Home Value Is Doing Fine" src="https://www.manausa.com/uploads/imagefiles/My-Home-Value-Is-Doing-Fine.JPG" alt="My Home Value Is Doing Fine" width="600" height="399" /></a>
But Our Landscaping Is Mature
This final graphic shows that in the South, many people who live in areas where home values have dropped (like Tallahassee) still believe that their home will out perform the market.
<a href="https://www.manausa.com/uploads/imagefiles/Zillow-Home-Owner-Confidence-Survey-Results.JPG"><img class=" img_box_center" title="Zillow Home Owner Confidence Survey Results" src="https://www.manausa.com/uploads/imagefiles/Zillow-Home-Owner-Confidence-Survey-Results.JPG" alt="Zillow Home Owner Confidence Survey Results" width="600" height="423" /></a>
We Love Our Homes In America
One thing that the Zillow real estate survey has reminded me is that we do love our homes in America. Pride of home ownership is evident when we continually hear that "my home hasn't lost value like everybody else's!" This is one of the great things about being a <a title="Joe Manausa - Tallahassee Real Estate" href="https://www.manausa.com/about/" target="_blank">Tallahassee REALTOR®</a> is that even during hard times, we are selling a product that most people love to own.<br /><br />
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit <a href="https://www.manausa.com/">www.manausa.com</a> or call us at (850) 366-8917.
Related Links
<a href="https://www.manausa.com/blog/zillow-real-estate-value/" target="_blank">Zillow Real Estate Value - Fact Or Fiction?</a>
<a href="https://www.manausa.com/blog/cheaper-real-estate-agent/" target="_blank">There Is Always Someone Who Will Do It Cheaper</a>
<a href="https://www.manausa.com/blog/greg-lane-leon-county-property-appraiser/" target="_blank">20 Questions - Greg Lane For Leon County Property Appraiser</a>
2009-07-03T08:24:00-07:002017-12-22T12:08:49-07:00Joe Manausatag:manausa.com,2012-09-20:3923You Get What You Pay For From Free Real Estate Services Sites<a href="https://www.manausa.com/uploads/imagefiles/florida200.png"><img class=" img_box_right" title="florida200" src="https://www.manausa.com/uploads/imagefiles/florida200.png" alt="" width="289" height="231" /></a>Well, it's hard to believe that we're coming upon two milestones at the very same time. This blog is now 1 year old, though my first meaningful blog post was in January of this year. But the real milestone is that today's blog post is the 200th post in the <a title="The Best Real Estate Blog In Tallahassee" target="_blank" href="https://www.manausa.com/blog/">Tallahassee Real Estate Blog</a>! I'm not so sure that when I started this that I thought it would be so involved.
Since this is the 200th post to the <a href="https://www.manausa.com/blog/">Tallahassee Real Estate Blog</a>, I think it is excellent that we have a question from a reader that will serve as the basis of today's article. I think the question mirrors what many people are wondering and really should be the central discussion point for real estate professionals all around the country.
The reader wrote:
Joe, great job on your posts, this is the first time that I have read your blog and I was actually surprised at the detailed level of information. I was expecting a "siss-boom-bah-rah-rah-rah" pro-realty blog and came away surprised with the level of honesty you impart. Thanks. I do have a question. I bought my house in May of 03. It's in-town 3br/2.5 br w/1780 SF, pool and about 1/3 acre lot about 7 blocks away from Leon High. It went for $130k, was appraised in Jan of 07 at $210k and now on Zillow, it rates at $228k. It sold in 01 for $100k (2 years before I bought it). I just can't believe the hype in terms of prices. I am a trained macro-economist and it still seems to me that we are in a a bubble zone. Home prices have gained anywhere from 40-80% since 2003, depending on location, however net income in Leon County has only risen about 4-5% in the same time, how can this be sustainable? I don't believe it can, at least logically if we are to assume new homebuyers don't want to eat cup-o-noodles 6 out of 7 days a week in order to pay for the mortgage?
This is a great conversation starter because it addresses several key issues that we have been discussing on the <a title="Blog about Tallahassee Homes And Tallahassee Housing" target="_blank" href="https://www.manausa.com/blog/">Tallahassee Real Estate Blog</a>. Rather than just "winging" my response, I've broken the comment down to sections that are each very important:
Home Valuations On Free Real Estate Services Sites
Our reader states that his home was appraised in January of 2007 for $210,000 and now a national real estate web site gives is a value of $228,000. This one little sentence is loaded with important information that all home sellers (and home owners and home buyers) should know:
The purpose of an appraisal has an affect on the value that the property receives. An appraisal that is done for purchase is usually much more conservative than one performed for a refinance (read this to say that a refi appraisal has been historically higher than what the home could be sold in the market). Remember, no matter what any Realtor or Appraiser says a home is worth, you still need to find a buyer who will pay that amount.
Zillow, Trulia, Yahoo real estate, and many other "free real estate service providers" aggregate a ton of information on homes and then try to simplify what they have to "ball park" prices on real estate in different parts of the country. Typically, they provide a good service if you only care to know an estimated property value for a home in a mass-produced, single builder area. As soon as you throw variables at these simplistic data mines, the valuations are soon off by as much as 60%. They just aren't ready yet to throw all the valuation criteria that buyers use into a massive equation to be used on a national level.
Real estate values are local in nature. While the whole country is going through a real estate down-turn right now, I bet there are a handful of markets that are in a bull market, due to local employment changes (like a large new employer moving in) and historic low interest rates. When somebody asks me to give them a value for their home, I'm able to take all the local real estate market conditions into consideration, whereas the national aggregators are trying to do a price per square foot calculation to come up with some non-market-realated opinion of value.
Real Estate Values Are Determined By Buyers
The value of a home is determined by what a buyer is willing to pay in TODAY's housing market, based on the comparison of the home in question with all of the others on the market, in its neighborhoods and others like it in the desired market area. So,
What does not affect the market value of a home?
What you paid for the house
Your remodeling costs
The amount of cash you need to buy your new house
What you want for your house
What I say your house is worth
What other real estate agents say your house is worth
What an appraiser says your house is worth
What the tax assessor said your house was worth
What Zillow says your home is worth
What Trulia says your home is worth
Home Appreciation In Tallahassee
The reader finally asks a very important question, which I will paraphrase as "If wages are up 5% in the past five years, how is it that Tallahasseans can afford to pay 40-80% more (the reader believes home prices have gained anywhere from 40-80% since 2003) for a home?" I think to answer this, I first want to point out that home values are up, but to a much lesser extent than the reader believes. The following table shows what the "average home price" in Tallahassee has been and how that compares to our current values:
<a href="https://www.manausa.com/uploads/imagefiles/tallahassee-home-values.jpg"><img class=" img_box_center" title="tallahassee-home-values" src="https://www.manausa.com/uploads/imagefiles/tallahassee-home-values.jpg" alt="" width="612" height="59" /></a>
Nevertheless, the question is still extremely valid. Single family home prices in Tallahassee are up 35% since 2003, and yet wages are up much less than that. How can buyers afford these homes?
The simple answer is "they can't!" Prices peaked in 2006 and since then, the number of people who are choosing to buy a home in Tallahassee continues to fall. This falling demand has and will continue to lead to falling prices until buyers feel that they can afford to buy a home. If you look at the following real estate graph of single family home sales in Tallahassee, you'll see that roughly 300 buyers per month are closing now versus nearly 700 per month at the peak of the market.
<a href="https://www.manausa.com/uploads/imagefiles/tallahassee-home-sales-trends.jpg"><img class=" img_box_center" title="tallahassee-home-sales-trends" src="https://www.manausa.com/uploads/imagefiles/tallahassee-home-sales-trends.jpg" alt="" width="601" height="462" /></a>
Readers' Questions Make For Best Real Estate Blog Discussion
I feel as if I've only scratched the surface in my response to this great feedback from our Tallahassee Real Estate Blog reader. I hope more people will provide the spark for our future blog posts and who knows, maybe we'll do a follow-up for our 300th post!
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit <a href="https://www.manausa.com/">www.manausa.com</a> or call us at (850) 366-8917.
<a id="unry" href="http://www.linkedin.com/in/tallahasseerealestate" rel="nofollow" style="background-color: #ff0000;"><img id="l73i" src="https://www.manausa.com/uploads/imagefiles/linkedinbutton.gif" alt="View Joe Manausa's profile on LinkedIn" width="160" height="33" border="0" /></a>2008-12-11T08:33:00-07:002017-11-17T15:30:45-07:00Joe Manausa