September 2019 Real Estate Market Update

If there is some sort of economic slowdown, how will it affect home prices? Well, if we take a look at the Federal Housing Finance Agency’s quarterly reports, year-over-year we are seeing appreciation. As a matter of fact, appreciation is at 3.6%, greater than the historical norm of about 3.5%. The level of appreciation has slowed, but there is no depreciation. Overall, pricing is still good.

Now, the amount of appreciation is pretty much determined by a variety of factors, including price range. The lower priced houses have the least amount of inventory and the greatest amount of demand, so are appreciating much higher. Higher priced homes are seeing higher inventory levels simply because there are less buyers that could afford those houses. As we go up in price, the amount of appreciation actually goes down.
Even though the appreciation in the low-price range is a little bit higher, the reason prices are still going up is because some of that inventory is not sellable (to most of the buying population). Most buyers want something nice, and now. The good news is investors are buying that inventory up, fixing it, and flipping it. So, they’re taking inventory that was not really marketable, purchasing it, refurbishing it, and putting it back on the market as something more sellable.

Home prices have increased steadily since 2011, creating record amounts of home equity and putting homeowners in a good position to weather future downturns.
Molly Boesel, The Office of the Chief Economist
Mortgage debt is at an all-time high, but because we’re buying more and more houses at higher prices. The per capita number is still very, very low – and close to historical lows. Yes, there is more mortgage debt, but there is more equity, according to a CoreLogic study. Just in the first quarter, people gained over $6,000.
Now, if we take a look at it overall, how much equity do people actually have? It has risen dramatically since 2011 – up to $6.3 billion of equity in this country right now. It is a different type of situation than we saw in 2008. So, 50% of the homes today have more than 50% equity in them. Nobody is walking away from those houses if things get tough.
EQUITY SHARE
Let’s take a look at the negative equity share. Now that people are building, prices are going up. Back in 2010, 25.3% of people had negative equity, and that has fallen dramatically to 4.1% in the first quarter of this year. So the good news is that there are less and less people that are in a negative equity situation. And prices are going to continue to show well.


With incomes up and current mortgage rates about 0.8% points below what they were one year ago, home sales should have a better sales pace in the second half of 2019 than a year earlier, leading to a quickening in price growth over the next year.
Dr. Frank Nothaft, Chief Economist for CoreLogic
Two good things: #1 is appreciation is still going to be there, and #2 is the amount of sales (because mortgage rates are going down) will start to tick up through September, October, November and December. Over the next 12 months, values will likely increase 5.2%.

We see the cool down flattening or even reversing course in the coming months and expect the housing market to continue coming into balance.
Ralph McLaughlin, CoreLogic’s Deputy Chief Economist
The stock market is very volatile right now, and the word “recession” is out there. It’s all over the place. You can’t pick up a financial newspaper or look on a financial news site without that word “recession” being on the front page.
So… When will the next U.S. recession begin? Well, if we combine 2019 and 2020, almost six out of ten of the economists, market analysts, and experts that were surveyed believe it’s going to occur before the end of next year. Now, there are some people that are suggesting that by bringing the subject up, by even addressing the subject, that you’re adding fuel to the fire – maybe the best thing to do is make believe it’s not even there and maybe it will go away.
That is a bad idea, because that’s what we did, kind of, in 2006. We kept on saying that the challenges we were having were only confined to certain states. “Well, that’s really California and Arizona.” Then when Florida got involved, we said, “Well, those are the sand states.” It took us a long time to realize, “No, we have a challenge.”When you hear the word “recession,” you’re going to be thinking about 2008, but this is different.

With people having PTSD from the last time, they’re still afraid of buying at the wrong time.
Ali Wolf, Director of Economic Research at Meyers Research
The housing crash during the Great Recession left a lasting impression… But as we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply.

The housing crash during the Great Recession left a lasting impression… But as we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply.
Jeff Tucker, Zillow Economist
Over 37% of the houses in this country right now don’t even have a mortgage on them. More than one out of three of all the houses! We’re in a different time. Back then, people were taking out mortgages, using their house as an ATM. They were buying jet skis, and new cars, and going on vacation. They were trading in the equity on an appreciating asset and purchasing a depreciating asset. Equity in homes is skyrocketing – because people are not making those same mistakes.

This is going to be a much shorter recession than the last one, I don’t think the next recession will be a repeat of 2008. …The housing market is in a better position.
George Ratiu, Senior Economist at realtor.com
The last recession was caused by a mortgage market meltdown that affected the housing market. In 2001, the stock market lost almost 25% of its value during that recession. Yet prices still went up 6.6%. As a matter of fact, during most of the past recessions, prices went up.

Zelman and Associates, the Home Price Expectations Survey, Fannie Mae, Freddie Mac, the Mortgage Bankers Association, CoreLogic, and ARCH Mortgage Insurance all agree that prices are going to remain solid.
Remember, affordability isn’t just about price. It’s an equation. There are three pieces of that equation: home prices, wages and interest rates (which are now down almost a full point from last year).
​So… what’s going on in Tallahassee?