There is a lot of confusion in the market lately due to misinformation about real estate market numbers. Today I’d like to clear this up for you.
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There is a lot of confusion in the market right now, so I’d like to alleviate some that confusion for you today. If you’ve kept up with the market around the country, you may have read headlines from major media sources like “California Home Sales Come Tumbling Down to Earth” and “California Home Sales Gaining Momentum,” which only adds to the confusion.
To paint a clearer picture for you, I’m going to show you what’s really taking place in our market with facts and data.
When talking about the market on the whole, many people will only look at the years that really took off, usually between 2003 to 2005, when sales were extremely high. If you look at the numbers from the years before that, however, you’ll see that those numbers are much closer to the kinds of numbers that we’re seeing today. Many people wonder when the next big peak or valley is going to happen in our market because of the most recent crash.
If we look at data from a little further back, though, we see that from 1990 to 1999, home sales steadily increased almost every year. Why did this happen? It’s because populations naturally increase. The most recent crash occurred because these numbers shot up much too quickly.
Interestingly enough, if you look at the graph above that removes the numbers from 2000-2013, you’ll see that home sales today are sitting almost exactly where they were in 1999, before the bubble and the crash. This means that we’re almost exactly where we should be!
Is affordability a challenge in the current real estate market? Let’s look at the housing affordability index. This index measures whether or not a typical family earns enough income to qualify for a mortgage loan.
In the graph above, you’ll see that the higher the score is, the easier it is to buy a home. When people say that home affordability is down right now, they’re right if we compare it from 2009 to 2015. However, from 2009-2012, we were faced with a whole bunch of foreclosures and short sales, which also lowered the value of other homes around them, resulting in homes being sold at a major discount. So, of course prices were lower then and people were able to buy more! Since home prices are coming back today, the housing affordability index is shrinking.
If we go back all the way from 1990 to 2000, we’ll see that today’s affordability index is higher in number. The index may not be as high as it was in 2009 or 2015, but the homes that were sold during those times were sold at major discounts. If we compare the numbers from this year to the previous decade, you’ll see that we’re doing just fine when compared to earlier years.
This means that right now we’re in a very healthy market. With interest rates as low as they are, a family with a household income of less than $45,000 can afford to buy a median-priced home. Isn’t that amazing?
If we look at inventory of homes on the market, we see that we have much less inventory this year than we did last year, and this is reflected in the low numbers for foot traffic. I don’t necessarily that there are fewer buyers on the market looking for homes; there are simply fewer houses to look at! When more homes are listed, the market will balance itself out.
What does all of this mean to you if you’re thinking about selling your home? Now is a great time to list your home on the market because there are many buyers out there who are looking to buy homes.
This is an even better time to buy a home since interest rates are still under 4%. It’s also important not to let a low credit score deter you for applying for a mortgage; over 50% of buyers with credit scores between 500 and 750 closed mortgages this year. Don’t put yourself on the sideline because of your credit score.
Also, don’t forget about our next Home Selling Sharks Seminar on October 22nd at the Hilton Garden Inn at Port Washington. Register for your seat here today!
If you have any questions about buying or selling homes in our market, don’t hesitate to reach out to me by phone or email. I’d be happy to help you!