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June 2021 Real Estate Market Update

June 16, 2021

All Real Estate News

June 2021 Real Estate Market Update
This month, our broker contacts reported a continuation of robust demand and intense competition from buyers to ‘win’ houses – with bidding wars, all-cash offers, waived contingencies and rent-free leasebacks increasingly common in many markets. - Ivy Zelman from the Z Report

There is so much happening in real estate right now, but the biggest story certainly is the lack of available inventory causing this market with “robust demand, intense competition” and biding wars.

across the united states seller traffic is weak to very weak and buyer traffic is strong to very strons

Overall, we are seeing weak seller traffic, and strong buyer traffic.

“In this Wild West environment, buyers are doing anything they can to stand out. And more and more, all-cash offers do just that, and can mean the difference between getting that dream home—or winding up empty-handed. Again.” - realtor.com

As more and more buyers are doing anything they can to stand out, we are seeing buyer fatigue – frustration of not being able to find a home or getting outbid time and time again.

Months inventory of homes for sale was at 4.6 in May 2020, down to in December and January 2021, and we currently sit at 2.4 months.

And we are in this situation because of inventory. While a healthy market has about 6 months inventory, we saw incredible lows of 1.9 months in December and January. Now we sit at 2.4 months – better, but not ideal. More buyers than sellers is causing home prices to go up.
 The FHFA reports a 13.9% increase in house appreciation year over year, Corelogic at 11.3% and the S&P at 13.2%

The March year-over-year home price appreciation numbers are in. FHFA has home prices appreciating at 13.9% over last year, CoreLogic at 11.3%, and Case-Shiller at 13.2%. Last year these figures were about 10%. And as we look forward, we’re forecasted to see strong appreciation.

Home price forecasts for 2021 from MBA is 10.3%, NAR at 9.2%, Fannie Mac at 8%, Zelman at 7%, and Freddie Mac at 6.6% - all averaging 8.2%

The average expert’s prediction on home prices right now is 8.2%. The ultimate determiner of price as we go forward is whether more homes come to market.

U.S. home price appreciation year over year for Q1 is 12.6 percent – 12.3% in the south Atlantic, 11.7% in the east south central, 11.1% in the west south central, 15.7% in the mountain, 14.3% in the pacific, 11.3% in the west north central, 12.1% in the east north central, 12.5% in the middle Atlantic, and 14.2% in new England.

The FHFA maps show price appreciation by region, which is strong across the country – on average 12.6% appreciation year-over-year in Q1 of this year.

If inventory increases slowly, house prices will continue to rise rapidly, and if inventory increases sharply, house price growth will slow - Bill MCBride from Calculated Risk

The decline in single-family permits indicates that builders are slowing construction activity as costs rise… While housing starts were strong at the beginning of the year, due to home builders constructing homes that were sold pre-construction, higher costs and limited availability of building materials have now paused some projects. - Chief economist a NAHB

We have strong conviction that we are not experiencing a bubble in U.S. housing…We are not at all suggesting that home price appreciation will maintain its current torrid pace. Home prices will continue to rise, but more gradually. - Strategist for Morgan Stanley

There is a difference between affordable housing versus housing affordability. Affordable housing oftentimes references the number of homes on the lower end of a market that are available for purchase. Housing affordability refers to how strong and how powerful the dollar is relative to what someone can buy.

Housing affordability on a year-over-year basis declined in March for the first time since January 2019, ending a more than two-year streak of rising affordability… House-buying power is likely to remain robust in the months to come, but affordability trends will likely hinge on changes in nominal house price appreciation. - Chief economist at First American

As we go forward, homes are going up in value. Interest rates are forecasted to go up. That’s going to compromise affordability.

Looking back at the bubble years, house prices exceeded house-buying power in 2006 nationally, but today house-buying power is nearly twice as high as the median sale price nationally… Many find it hard to believe, but housing is actually undervalued in most markets and the gap between house-buying power and sale prices indicates there’s room for further house price growth in the months to come. - Chief economist at First American

Housing affordability index from 1990 to today from NAR shows we are at 174 now, and at 197 during the years when distressed properties dominated the market.

As affordability is measured, houses may actually be undervalued in most markets. If we look at the housing affordability index that’s produced by NAR, you can see where we stand today. The higher the index, the more affordable a home is. Homes are more affordable now when looking all the way back to 2012/ 2013 in terms of what the dollar will buy.

Percentage of median income needed to purchase a median priced home sat at 21.2% from 1985-2000, 25.4% in 2006, and 14.4% today

In other words, the percentage of median income needed to purchase a median price home historically is about 21.2%. Back in the housing crash that rose to about 25.4%. Today we sit at 14.4%, on average. Homes are affordable.

Contrary to popular belief, owning one’s own home is frequently more affordable than renting. It is cheaper to buy a home than it is to rent in 2/3 of American counties. -Mike Loftin from Homeownership is affordable housing

The median asking price for rent appears to gradually increase from 1990 to 2019, where is takes a sharp increase

The price of rent continues to go up, looking all the way back to 1990. Growing your wealth by increasing your assets is one of the biggest benefits of homeownership.

We need to stop seeing housing as a reward for financial success and instead see it as a critical tool that can facilitate financial success. Affordable homeownership is not the capstone of economic well-being; it is the cornerstone. - mike loftin at homeownership is affordable housing

Homes with at least 50% equity are skyrocketing. ATTOM data solutions 2021 q1 home equity report shows 17.8 million residential properties with a mortgage with at least 50% equity, 31.9%, and 38% of all homes are owned free and clear

Homes with at least 50% equity are skyrocketing. Seventeen million homes in this country (with a mortgage) were considered equity rich – meaning they have greater than 50% equity. That number equates to 31.9% of properties that have a mortgage. And 38%, according to ATTOM data, are owned free and clear. That is a significant amount of equity across the country.

Let’s take a look at what the experts are saying:

Homebuyers—interest rates are still historically low, though they are inching up. Housing prices have spiked during the last six-to-nine months, but we don’t expect them to fall soon, and we believe they are more likely to keep rising. If you are looking to purchase a new home, conditions now may be better than 12 months hence…Those who remember the housing bubble of 2006-2007 may be nervous watching U.S. housing prices soar now. But the previous bubble was fueled by speculative buying, which we do not think is the case today. - jp morgan insights report

There are reasons to believe that this is likely to be an unusually long and strong housing expansion. Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle. Coronavirus-related preference changes have also sharply boosted home buying demand. At the same time, supply is unusually tight, with available homes for sale at record-low levels. Double-digit price gains are rationing the supply. - merrill lynch capital market outloook

Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. ... consumer surveys indicate that household buying intentions are now the highest in 20 years...As a result, the model projects double-digit price gains both this year and next. - goldman sachs research note on housing

Unlike 15 years ago, the euphoria in today's home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation…This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course. - morgan stanley thoughts on the market podcast

Americans choice of best long term investment is real estate at 41%, stocks at 26%, gold at 18%, savings accounts at 9% and bonds at 3%

In Gallup’s poll, 41% choose real estate as the best long-term investment – the highest result of the five investment options in the past 11 years that Gallup’s asked this question.

Finally, here is how we wrapped up residential real estate in Tallahassee:

June 2021 Tallahassee Residential Listings: 910 listed, 784 sold, 87% sold, $276,468 average sold list price, $275,638 average sold sale price, 3 days on market, 2% listings expired, $343,082 average unsold list price. Kelly Chavers, REALTOR

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